Tisdell and Secretary, Department of Social Services (Social services second review)
[2015] AATA 582
•11 August 2015
Tisdell and Secretary, Department of Social Services (Social services second review) [2015] AATA 582 (11 August 2015)
Division GENERAL DIVISION File number
2014/4449
Mark Tisdell
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Dr James Popple, Senior Member
Date 11 August 2015 Place Canberra The decision of the Social Security Appeals Tribunal on 4 August 2014 is set aside and, in substitution, the following decision is made:
Under s 1184K(1) of the Social Security Act 1991, part of the compensation payment that the applicant received, under the commutation agreement registered on 18 March 2004, is to be treated as not having been made. The amount of the payment that is to be treated as not having been made is the amount that results in the lump sum preclusion period (calculated in accordance with s 1170 of the Social Security Act 1991) having ended on 20 November 2013.
..........................[sgd]..............................................
James Popple, Senior Member
CATCHWORDS
SOCIAL SECURITY — compensation preclusion period — disability support pension — whether special circumstances exist to shorten preclusion period — whether applicant received letter advising of preclusion period — applicant given wrong advice — applicant purchased modified house — unexpected ill health — breakdown of relationship — application of the 50% rule — financial hardship — hardship not due to extravagant spending or recklessness — part of lump sum payment ought to be treated as not having been made — decision set aside and substituted.
LEGISLATION
Acts Interpretation Act 1901, ss 28A, 29
Social Security Act 1991, ss 23(12), 94(1), 1169, 1170, 1171, 1178, 1180, 1182, 1184, 1184K(1)
Social Security (Administration) Act 1999, ss 3(3), 42, 237; Schedule 2, clause 4(1)
CASES
Beadle v Director‑General of Social Security (1984) 6 ALD 1
Beadle v Director‑General of Social Security (1985) 7 ALD 670
Clark v Secretary, Department of Employment and Workplace Relations (2007) 161 FCR 451
Colaiacolo and Secretary, Department of Social Security, unreported, Administrative Appeals Tribunal, 24 April 1985
Cooper and Secretary, Department of Social Services [2015] AATA 41
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Harris v Secretary, Department of Employment and Workplace Relations (2007) 158 FCR 252
Ivovic and Director‑General of Social Services, unreported, Administrative Appeals Tribunal, 15 July 1981
Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281
Martin and Secretary, Department of Social Security, unreported, Administrative Appeals Tribunal, 14 November 1990
Mazurak and Secretary, Department of Family and Community Services [2002] AATA 883
Secretary, Department of Employment and Workplace Relations v Homewood (2006) 91 ALD 103
Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Secretary, Department of Social Security and VXY (1993) 30 ALD 681
Secretary, Department of Social Security and VYS (1995) 40 ALD 745
Smith and Department of Families, Community Services and Indigenous Affairs [2012] AATA 262
Walker and Department of Family and Community Services [2002] AATA 71
Whittall and Secretary, Department of Social Services [2015] AATA 129
Wilson and Director‑General of Social Services, unreported, Administrative Appeals Tribunal, 7 May 1981
SECONDARY MATERIALS
Department of Social Services, Guide to Social Security Law (version 1.213, 1 July 2015)
REASONS FOR DECISION
James Popple, Senior Member
11 August 2015
Summary
I set aside the decision of the Social Security Appeals Tribunal (the SSAT) to reject the applicant’s claim for the disability support pension (the DSP) on the basis that the lump sum preclusion period (the preclusion period) had not ended. I think it is appropriate, in the special circumstances of the applicant’s case, to treat part of his compensation payment as not having been made, so that the preclusion period ended on 20 November 2013. The Secretary must now consider the applicant’s claim for the DSP.
Background
On 12 October 1989, Mr Mark Tisdell was seriously injured in a motor vehicle accident on his way home from work. The accident left him a paraplegic. He was 17 years old. At the time, he was employed as a fork lift operator. His employer (the employer) paid him weekly compensation payments, and additional payments for medical and health‑related costs. It also paid him three lump sum payments (in 1991, 1992 and 2003) totalling $126,442.80.
In early 2003, through his then legal representatives (the law firm), Mr Tisdell commenced negotiations with the employer for a commutation agreement in relation to his remaining worker’s compensation entitlements. In January and February 2004, there was correspondence between Centrelink and the law firm about the preclusion period that would apply before Mr Tisdell would be able to claim Centrelink payments. I discuss that correspondence below.[1]
[1] See [12]–[16] below.
On 18 March 2004, a commutation agreement was registered in the New South Wales Workers Compensation Commission. The agreement was for the employer to pay Mr Tisdell a lump sum compensation payment (the lump sum) of $1.3 million in commutation of its obligations to him for ongoing periodic compensation and medical and health‑related costs. The law firm prepared a schedule of loss in support of the agreement (the schedule of loss). It indicated that the lump sum comprised amounts for future economic loss, requirements for care, future medical expenses, and support at home and for daily living.
On 11 September 2004, Centrelink wrote separately to Mr Tisdell and the law firm, advising that Centrelink had calculated that Mr Tisdell’s preclusion period was from 20 March 2004 until 1 May 2026.
On 4 December 2013, Mr Tisdell lodged a claim for the DSP. On 25 February 2014, Centrelink rejected his claim on the basis that the preclusion period had not ended. On 12 May 2014, Mr Tisdell sought review of that decision. On 10 June 2014, an authorised review officer decided to disregard some of Mr Tisdell’s lump sum,[2] and calculated that the preclusion period would end on 28 November 2025, but otherwise affirmed the decision to reject his claim. On 11 June 2014, Mr Tisdell applied to the SSAT for review of that decision. On 4 August 2014, the SSAT affirmed the authorised review officer’s decision.
[2] The authorised review officer treated $27,990 of the lump sum as not having been paid to Mr Tisdell, on the basis that his need to purchase a car modified to suit his needs was a special circumstance. This was done under s 1184K of the Social Security Act 1991 (see [10] below).
On 28 August 2014, Mr Tisdell applied to the Tribunal, under s 179 of the Social Security (Administration) Act 1999 (the Administration Act) and s 29(1) of the Administrative Appeals Tribunal Act 1975, for review of that decision.
Decision under review
The decision under review is the SSAT’s decision on 4 August 2014 affirming Centrelink’s decision to reject Mr Tisdell’s claim for the DSP on the basis that the preclusion period had not ended.
Issue
The issue in this review is what preclusion period should apply to Mr Tisdell. That depends on whether there are special circumstances that make it appropriate to calculate the preclusion period on the basis that the lump sum (or part of it) was not paid to him.
Legislative framework
Section 1169 of the Social Security Act 1991 (the SS Act) provides that, if a person receives a lump sum compensation payment, a “compensation affected payment” is not payable to that person during the preclusion period. Section 17(1) defines “compensation affected payment” to include the DSP. Section 1170 provides for the calculation of the preclusion period, having regard to (amongst other things) the compensation part of the lump sum. Section 1184K(1) provides:
1184K Secretary may disregard some payments
(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.
(Sections 1169, 1170 and 1184K are all in Part 3.14 of the SS Act, which is about compensation recovery.)
Mr Tisdell has received a compensation payment (the lump sum), so he cannot claim the DSP during the preclusion period. However, the preclusion period can be calculated on the basis that the lump sum (or part of it) was not paid, if it is appropriate to do so in the special circumstances of his case.
Correspondence between Centrelink and the law firm
Mr Tisdell provided a copy of a file note made under the law firm’s letterhead, and dated 20 January 2004. It reads:
Workers Comp/legal department.
· $268,034.00 eco loss—preclusion period.
·
From date of settlement—without Super being paid
He can claim again after the preclusion period on 27 Febuary [sic] 2012 as close to an est. as possible.
This would appear to be a record of a telephone conversation between an employee of the law firm (whose name appears on the file note) and an employee of Centrelink (whose first name and phone number[3] appear on the file note). The file note gives the relevant file name as “Tisdall”.
[3] The phone number is still advertised on the web site of the Department of Human Services as being a Centrelink contact number.
Centrelink’s records indicate that it received a “compo estimate” letter on 27 January 2004. No copy of that letter can be found. However, Mr Tisdell provided a copy of a draft letter, dated 20 January (the same date as the file note), from the law firm to Centrelink. That draft letter advised that Mr Tisdell was “considering a commutation which would involve payment in respect of future economic loss in the amount of $271,428.04” (a different amount than in the file note). The law firm asked Centrelink to confirm its verbal advice that “the preclusion period would cease in approximately February 2012”, because “[w]e need same confirmed in writing in order to advise our client”.
Another Centrelink record (dated 30 January 2004) notes an “[e]stimate request received from solicitors for $271,428.04 lumpsum” and that “[a]ll lumpsums have been aggregated to work out estimate”. It gives the total estimated lump sum as $397,870.84. I note that that is the sum of the three lump sum payments referred to in [2] above and the amount that the law firm gave in its letter.
On 3 February 2004, Centrelink replied to the law firm’s letter. It said that, “based on an estimated settlement amount of $397,870.84” the preclusion period was likely to end on 9 February 2010. It explained how the preclusion period is calculated, and advised that Centrelink would confirm the preclusion period when the amount of the lump sum was known.
As noted above, on 11 September 2004, Centrelink wrote to Mr Tisdell and to the law firm. Centrelink advised that it had calculated that Mr Tisdell’s preclusion period would end on 1 May 2026, on the basis that the lump sum was $1.3 million.[4] (I will call the letter that Centrelink wrote to Mr Tisdell the September letter.)
[4] Mr Tisdell argues that the Secretary miscalculated the preclusion period. He says that the Secretary should not have included the three lump sum payments referred to in [2] above when performing that calculation, because those lump sums did not relate to economic loss. I do not need to consider this argument, because of my decision to disregard part of Mr Tisdell’s lump sum in calculating the preclusion period (see [65]–[66] below). However, I note that ss 1171(1)(a), (b) and (c) of the SS Act provide that “If … a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and … at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn; … the person is taken to have received one lump sum compensation payment … of an amount equal to the sum of the multiple payments”. The lump sum included a component for lost earnings. So, it would appear that the Secretary correctly included the three lump sum payments (together with the lump sum) when calculating the preclusion period.
Mr Tisdell’s understanding of the preclusion period
Mr Tisdell gave evidence at the hearing. I accept him as a witness of truth. He says that the law firm told him that the preclusion period would end eight years after the commutation agreement. On 22 January 2004, the law firm wrote to WorkCover regarding the commutation agreement, saying that “Centrelink advises the preclusion period will be 8 years”. Mr Tisdell provided a copy of the terms of settlement filed in the Family Court in March 2004, when he and his wife divorced. Those terms of settlement, dated two days before the commutation agreement was registered, refer to the employer’s offer of a lump sum of $1.3 million and note that, if the commutation agreement were to be registered, Mr Tisdell’s entitlement to Centrelink benefits would be suspended “for a period of approximately 8 years”. I note that the preclusion period referred to in both the law firm’s letter to WorkCover in January and the terms of settlement in March is consistent with the period referred to in the law firm’s letter to Centrelink in January 2004, though not with the periods referred to in Centrelink’s reply on 3 February (about six years) or the September letter (over 22 years).
Mr Tisdell says that he never received the September letter, and that the law firm never advised him of its contents. He says that he didn’t learn, until he contacted Centrelink about the DSP in late 2013, that the preclusion period would end on 1 May 2026.
Did Mr Tisdell receive the September letter?
Section 28A of the Acts Interpretation Act 1901 is about the service of documents. Section 29 is about the meaning of service by post. The Secretary says that Centrelink sent the September letter by pre‑paid post to Mr Tisdell’s last known address and, because of ss 28A and 29, Mr Tisdell is deemed to have received the letter “unless the contrary is proved”. The Secretary has not provided any evidence that the letter was sent in this way, beyond a printout from Centrelink’s records showing the content of the letter. But, even if the September letter was sent to Mr Tisdell, I am satisfied, on the balance of probabilities, that he did not receive it. I have reached this conclusion on the basis of Mr Tisdell’s evidence, and on the basis of his actions between 2004 and 2013 (discussed below), which are consistent with him thinking that the preclusion period was eight years and not 22 years.
The Secretary referred me to s 23(12) of the SS Act, which provides that, if ss 28A and 29 of the Acts Interpretation Act “apply to a notice under this Act”, those provisions “apply to the notice even if the Secretary is satisfied that the person did not actually receive the notice”. The Secretary also referred me to s 237 of the Administration Act, which provides that, if notice of a decision under the social security law[5] is sent by pre‑paid post to a person’s last known address, that notice is taken to have been given to the person. But the September letter was neither a notice under the SS Act nor a notice of a decision under the social security law.
[5] Section 3(3) of the Administration Act defines “the social security law” to include the SS Act.
In Part 3.14 of the SS Act, only ss 1178, 1180, 1182 and 1184 provide for the Secretary to give a notice to a person, but none of those provisions applied to Mr Tisdell at the time.[6] In its 3 February letter to the law firm, Centrelink had foreshadowed that it would send “a formal recovery notice” when the amount of the lump sum was known and the preclusion period could be calculated. But the September letter was not a recovery notice. It noted that “Centrelink’s charge” relating to the lump sum was “nil”, presumably because Mr Tisdell had not received any Centrelink payment during the preclusion period. Under s 1178 of the SS Act, the Secretary may send a person a written notice determining that they must repay a specified amount, but only if that person has received a compensation affected payment from Centrelink during the preclusion period. A letter advising that there is no repayment to be made is not a notice under s 1178.
[6] These provisions apply where a person has received, or claimed, a compensation affected payment (for example, the DSP) and: the person received a lump sum compensation payment (s 1178) or periodic compensation payments (s 1180), or made a claim against another person (s 1182); or another person is liable to pay the person compensation or indemnify a compensation payer against payment (s 1184).
The September letter did not determine the preclusion period; s 1170 of the SS Act determines the preclusion period. The September letter advised Mr Tisdell of the preclusion period that the Secretary had calculated. The Secretary was not required by, or expressly empowered by, the SS Act to send it. The letter refers to review rights “[i]f you do not agree with this decision”, but there was no decision that could have been reviewed because the Secretary had not determined the preclusion period or determined that Mr Tisdell was liable to repay any money to Centrelink.
As the September letter was not a notice under the SS Act, s 23(12) does not apply. And, as it was not a notice of a decision under the social security law, s 237 of the Administration Act does not apply either. Neither provision prevents me from finding that Mr Tisdell did not receive the September letter.
Having regard to Mr Tisdell’s evidence, and the documents discussed above, I make the following findings on the balance of probabilities. From 2004 until 2013, Mr Tisdell thought that the preclusion period ended in February 2012. He thought this because that is what he was told by the law firm before he received the lump sum. He did not receive the September letter. The law firm did not advise him of its contents. In 2013, he learnt that the preclusion period would end on 1 May 2026.
Mr Tisdell’s circumstances after he received the lump sum
Mr Tisdell’s actions after he received the lump sum, and his circumstances since that time, are important to this review. I make the findings set out in [26]–[34] below, on the balance of probabilities. These findings are based on the documents before me, and on statements and evidence given at the hearing by Mr Tisdell, his father and his sister. Mr Tisdell’s evidence is generally uncontested, though some of it is uncorroborated. I accept this evidence.
Mr Tisdell and his wife married in 1995, had two children in 2001, separated in May 2003 and divorced soon after the commutation agreement was registered in March 2014. Mr Tisdell paid some of the lump sum to his wife as part of the divorce settlement. He no longer recalls the details, but the terms of settlement envisaged him paying her $284,000. Those terms also envisaged the sale of the matrimonial home in Sydney, with 70% of the proceeds of that sale to go to the wife. That home was sold after the divorce.
Before the commutation agreement was registered, Mr Tisdell sought advice from a financial adviser. He told his adviser that the preclusion period was to be eight years. Acting on the financial advice he was given, he set up investment accounts so that he would be paid what he called a “wage” from his lump sum during those eight years.
From approximately 2004 to 2009, Mr Tisdell suffered from severe pressure sores. This required multiple surgeries, and extended periods of hospitalisation. For most of those six years, he was unable to sit up or use a wheelchair. As a result, he spent nearly all of that time in bed: in hospital or at home. He incurred significant medical costs during this period, though he has no records of those costs.
Mr Tisdell has worked occasionally since his accident, including for his father’s company. He is registered with a job network provider, but has not worked for the last 5–6 years.
In April 2005, Mr Tisdell purchased a block of land 26 kilometres from Braidwood. He paid $210,000. In 2008, his ex‑wife and children moved to the Braidwood area. In 2009 and 2010, Mr Tisdell constructed a kit home on his land, modified for his use with ramps and wide doorways for his wheelchair, etc. In 2010, he moved into the house. It has four bedrooms. His furniture is mostly second‑hand, provided by family. The property is remote. It is 20 minutes’ drive from Braidwood along unsealed roads. It has no services. In 2012, the land was valued at $184,000. A real estate agent has advised him that the house and land might sell for $600,000–$650,000. Other properties in the area have taken up to seven years to sell. He has been advised that, if his property were priced at $400,000, it might sell more quickly.
Since 2009, Mr Tisdell has run a small number of cattle on his land. He has a car and a quad bike, both modified for his use. He has a truck and a tractor, which are driven by a friend who occasionally comes from Sydney to assist him. His cattle produce no profit. He runs cattle because he enjoys working outdoors. His health has improved since he moved to the property. He attributes that improvement to being able to work outdoors.
Mr Tisdell’s children attend high school in Braidwood. They stay with him in his house on every second weekend, and for half of the school holidays.
Mr Tisdell’s funds ran out in 2013. Since then, he has survived on assistance, including financial assistance, from his parents and his sister, and from charities. His parents are pensioners. His sister says that she cannot continue to provide him with financial support for much longer.
On 21 November 2013, Mr Tisdell contacted Centrelink about claiming the DSP. That was when he learnt that the preclusion period was 22 years and not eight.[7] As noted above, he lodged a claim for the DSP on 4 December 2013.
[7] See [24] above.
Special circumstances
Because of s 1184K(1) of the SS Act, I can disregard some or all of Mr Tisdell’s lump sum in calculating the preclusion period if I think “it is appropriate to do so in the special circumstances of the case”. The SS Act does not define “special circumstances”. In Beadle v Director‑General of Social Security, the Tribunal said:
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. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.[8]
On appeal from that decision, the Full Court of the Federal Court added that what constitutes special circumstances will “depend upon the circumstances of the particular case” and that:
We do not think it is possible to lay down precise limits or precise rules. … The phrase “special circumstances”, although lacking precision, is sufficiently understood in our view not to require judicial gloss.[9]
[8] (1984) 6 ALD 1 at 3 per Toohey J, Wilkins M and Billings M.
[9] Beadle v Director‑General of Social Security (1985) 7 ALD 670 at 674 per Bowen CJ, Fisher and Lockhart JJ.
The Secretary concedes that the discretion is a broad one,[10] but refers me to the Guide to Social Security Law (the Guide), which is available on the web site of the Department of Social Services.[11] The Guide is a statement of government policy, and I should have regard to it when exercising the discretion in s 1184K(1).[12] The Guide says that “[t]he special circumstances provisions should only be applied in unusual, unforeseen or exceptional circumstances”.[13]
[10] See Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 162 per French J: “The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it.”
[11] Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 69 per Bowen CJ and Deane J.
[13] Guide, section 4.13.4.10, >
In Kirkbright v Secretary, Department of Family and Community Services, the Federal Court said:
… in my view, s 1184 [subsection (1) of which was then the same as s 1184K(1) is now] is designed specifically to enable the respondent, and on review the Tribunal, to ameliorate … unfairness or injustice when it appears by virtue of the strict application of the Act.[14]
The Court added that the provision may provide a “release valve” for unfairness or injustice in certain circumstances.[15]
[14] (2000) 106 FCR 281 at 286 [22] per Mansfield J. See also Ivovic and Director‑General of Social Services, unreported, Administrative Appeals Tribunal, Hall SM, Billings M and Tickle M, 15 July 1981; (1981) 3 ALN N95 at N97.
[15] (2000) 106 FCR 281 at 288 [28] per Mansfield J.
In Whittall and Secretary, Department of Social Services, the Tribunal said that the exercise of the discretion in s 1184K(1) “requires the wisdom of Solomon”.[16]
[16] [2015] AATA 129 at [43] per McCallum M.
Mr Tisdell says that, applying s 1184K(1), I should decide that, in the special circumstances of his case, it is appropriate to disregard some or all of his lump sum in calculating the preclusion period. He says that those special circumstances are as follows:
·Mr Tisdell was given wrong advice by Centrelink;
·he experienced unexpected ill health;
·the money he spent on his house and land should be disregarded, and there are impediments to the sale of the property;
·the money he paid in satisfaction of the divorce settlement should be disregarded;
·it is excessive to deem half of his lump sum as relating to economic loss; and
·he suffers severe financial hardship.
Wrong advice
Mr Tisdell says that Centrelink wrongly advised the law firm of the preclusion period. He says that it should have been clear to Centrelink, from communications from the law firm, that the quoted amounts were not the total settlement amount.
It is true that the figures that the law firm gave Centrelink in January 2004, by phone and by letter ($268,034.00 then $271,428.04[17]), were each said to be the component of the settlement amount relating to Mr Tisdell’s economic loss—not the total settlement amount. But Centrelink’s reply on 3 February made it clear that its estimate of the preclusion period was based on $397,870.84 being the total settlement amount, and not just a component of it. Centrelink was not advised of the actual total settlement amount until March 2004, when that figure was provided to Centrelink by the employer. Centrelink prepared the September letter using that figure.
[17] See [12]–[13] above. The schedule of loss gives the latter figure as the component in relation to future economic loss.
I have already found that the law firm advised Mr Tisdell that the preclusion period would end in February 2012.[18] That advice was wrong. I do not think that Centrelink can be held responsible for that wrong advice. It should have been clear to the law firm—from Centrelink’s reply, if not from familiarity with the SS Act—that the exclusion period would be significantly longer if the amount of the total settlement was significantly more than the amounts that the law firm had given.
[18] See [24] above.
I do not think that Centrelink’s advice is a special circumstance for the purposes of s 1184K(1), but I think that the law firm’s advice to Mr Tisdell is. The Guide sets out general principles for decision makers to follow when exercising the discretion. In relation to “[i]ncorrect or insufficient legal advice”, these are:
·depending on the individual circumstances of a person’s compensation case, the person’s claim that they have received incorrect or insufficient advice may be weakened if the person has had an interview with Centrelink where they have acknowledged that they understand that they will be precluded from income support for the duration of the compensation preclusion period.
·generally, if a person has been badly advised by their legal representative they may seek remedy through the courts, however:
othe person may not be, or is ever likely to be, in a financial position to take this action.
othe error may not be actionable.
In relation to the first point, there is no doubt that Mr Tisdell understood that he would be precluded from income support for the duration of the preclusion period. But I do not think that this weakens his claim in this regard. The law firm told him that the preclusion period would be eight years; it was almost three times longer than that. That is a significant difference, and the law firm’s advice caused Mr Tisdell’s misunderstanding of how the preclusion period would affect him.
Reflecting the second point above, the Secretary says that, if the law firm gave Mr Tisdell wrong advice, that is a matter between him and the law firm. I do not think it is reasonable to expect someone in Mr Tisdell’s circumstances to sue his former legal advisers.[19] Even if the advice is actionable (more than a decade after it was given), I do not think that Mr Tisdell is, or is likely to be, in a financial position to take action against the law firm.
[19] See Secretary, Department of Social Security and VXY (1993) 30 ALD 681 at 698 [54] per Dwyer SM, Rodopoulos M and Baker M.
Wrong advice from a legal advisor can amount to a special circumstance,[20] and I think that it does in this review.
[20] See Secretary, Department of Social Security and VYS (1995) 40 ALD 745 at 757 [38] per Dwyer SM.
Unexpected ill health
Mr Tisdell says that his unexpected ill health, suffering from pressure sores, is a special circumstance. The Guide says that, to be a special circumstance, such ill health must be unforeseen and unexpected, and the “state of ill health should be more severe than the majority of DSP recipients”.[21] These criteria are met in Mr Tisdell’s case. It was foreseeable that he might suffer pressure sores: he suffered from them while the commutation agreement was being negotiated, and the schedule of loss identified money for nursing care for six weeks per annum for pressure sores. But the extent of his ill health due to pressure sores was unexpected: he suffered from them continually for about six years. I think that the level of Mr Tisdell’s ill health due to the pressure sores was more severe than that of the majority of DSP recipients, because he was unable for such a long period to sit up or use a wheelchair.
[21] Guide, section 4.13.4.20, >
The Guide also says that claims of unexpected ill health should be substantiated by documentation. Mr Tisdell has not done this. He says that he no longer has the medical or financial records that would substantiate his condition during the relevant period or the cost of treatment. I have already found that he did suffer from severe pressure sores between 2004 and 2009, and that he incurred significant medical costs during that period.[22] Mr Tisdell’s evidence on this point, although uncorroborated, was uncontested. I do not think that his inability to provide documentary evidence precludes me from treating this period of unexpected ill health as a special circumstance.
[22] See [28] above.
Mr Tisdell’s home
The Secretary says that it is open to Mr Tisdell to sell his property, and purchase more modest accommodation with the proceeds. Mr Tisdell says that the money that he spent on buying a home specific to his needs should be disregarded for the purposes of deciding whether special circumstances exist. In any event, he says, there are impediments to him selling the property and realising the asset.
The Guide says that, “where a person uses compensation proceeds to purchase a house or pay off the balance of a home loan, special circumstances would generally not be found”.[23] But the Guide also identifies an exception to this general principle, where “[t]he house has been substantially modified due to the person’s disability and other similar suitable accommodation would be difficult to obtain.”
[23] Guide, section 4.13.4.20, >
The suitability of the property to Mr Tisdell’s needs is threefold: the house is appropriate for a wheelchair‑bound person; it is close to where his children live with their mother, and big enough for his children to stay with him; and he can run a small number of cattle on the land. Mr Tisdell does not make money from running cattle, but he says—and I accept—that his health is improved by being able to do so.[24]
[24] See [31] above.
The Secretary accepts that Mr Tisdell’s wish to live near his children is understandable, but says that “this consideration does not warrant the disregard of such a substantial asset”. I would put it more strongly: I think that his wish to live near his children is not just understandable, but reasonable. And I do not think that Mr Tisdell behaved unreasonably when he bought his home, rather than renting. It will frequently be financially prudent to buy a property rather than rent, especially when the property is modified due to a person’s disability. I think that this must be the rationale for the exception in the Guide that I have quoted in [50] above: it would be a false economy to force a person to sell a property whose value to that person is greater than the general market value of the property, because it has been modified to meet their specific needs. But that exception also requires that other similar suitable accommodation be difficult to obtain. Mr Tisdell says that there is no suitable rental accommodation available in the Braidwood area. That is a plausible assertion, though he has provided no evidence in support of it.
In any event, I agree with Mr Tisdell that there are significant impediments to him selling the property. The remoteness and inaccessibility of the property alone would make it difficult to sell. In circumstances where a person has made what would appear to be a prudent financial decision to buy, rather than rent, a home, I do not think it is reasonable to expect them to sell that home at any price in order to quickly realise the asset. It would be different if the asset in question had been bought as an investment, or was a luxury item. But, when the asset is a home, whose amenity would need to be provided in some other way if it were sold, it is easier to disregard that asset for the purposes of deciding whether special circumstances exist.
I do not need to also take into account the fact that the property is close to Mr Tisdell’s children, or that he is able to run cattle. His home—to adopt the language of the Guide—has been substantially modified due to his disability and other similar suitable accommodation would be difficult to obtain, because it would be difficult for him to sell. This is sufficient for me to disregard the money—or, at least, some of the money—that he spent on his home when deciding whether special circumstances exist. Given the decision I have made below about the appropriate preclusion period,[25] it is not necessary for me to determine how much (of the lump sum that Mr Tisdell spent on buying his home) to disregard for those purposes.
[25] See [66] below.
The divorce settlement
Mr Tisdell says that the money that he paid to his ex‑wife as part of the divorce settlement should be disregarded for the purposes of calculating the preclusion period. This cannot be a special circumstance in this review. The breakdown of a relationship could amount to a special circumstance.[26] But the breakdown of Mr Tisdell’s marriage was not unexpected when the commutation agreement was finalised—in fact, it was expected. The commutation agreement and the divorce settlement were both finalised in March 2004. The terms of settlement filed in the Family Court refer to the then unregistered commutation agreement. The schedule of loss makes no allowance for the money that Mr Tisdell was to pay his wife in the divorce settlement. But he knew, before the commutation agreement was finalised, precisely what he would be required to pay. There is no reason to disregard that money for the purposes of calculating the preclusion period.
[26] See Mazurak and Secretary, Department of Family and Community Services [2002] AATA 883 at [23] per McCabe M.
The 50% rule
As noted above, s 1170 of the SS Act provides for the calculation of the preclusion period, having regard to (amongst other things) the compensation part of the lump sum. The “compensation part” effectively means that part of the lump sum relating to economic loss. Section 17(3) deems the compensation part to be 50% of the lump sum, in certain circumstances. This is called the 50% rule. The 50% rule applies to Mr Tisdell’s lump sum. He points out that most of his lump sum was calculated on the basis of his future care needs, and that only about 21% was for his economic loss. Mr Tisdell says that deeming 50% of his lump sum to be compensation for his economic loss, for the purposes of calculating the preclusion period, amounts to a special circumstance.
As the Federal Court explained in Secretary, Department of Family and Community Services v Chamberlain:
The statutory purpose [of the 50% rule] is to overcome the need in each case to determine what part of a lump sum compensation payment in truth represents economic loss. Although the assumptions to be made and the result reached are necessarily arbitrary, it is a course which has been taken for administrative simplicity …[27]
In Clark v Secretary, Department of Employment and Workplace Relations, the Court said that it was clear that the policy objective of the 50% rule “was to prevent manipulation to obscure the economic loss component in compensation payments and instead deem a flat 50% in all cases”.[28] The Court added:
… in an imperfect world in which settlement figures were being manipulated so as to understate the component for loss of earnings and of earning capacity, the legislature has solved the problem by the rough and ready 50% rule.
… The provisions reflect an acceptance by the legislature that it is not practicable to achieve complete justice attuned to the circumstances of each individual case.
It may well be that in Mr Clark’s case … the statutory formula produces a result that is unfair to him, but if so, that result flows from a deliberate policy decision of the legislature favouring simplicity and efficiency of administration and reduction in administrative costs over attaining a fair result in each case considered on its individual merits.[29]
[27] (2002) 116 FCR 348 at 353–354 [25] per Kiefel J.
[28] (2007) 161 FCR 451 at 460 [41] per Lindgren J.
[29] (2007) 161 FCR 451 at 461 [42]–[44] per Lindgren J.
In light of this Federal Court authority, I cannot decide that application of the 50% rule to Mr Tisdell constitutes special circumstances.[30] In fact, I don’t see how application of the 50% rule could ever constitute special circumstances, no matter what proportion of a compensation payment was compensation for economic loss. Section 1184K of the SS Act is designed to ameliorate unfairness or injustice,[31] but not unfairness or injustice that results from the application of the 50% rule.
[30] See also Cooper and Secretary, Department of Social Services [2015] AATA 41 at [23] per Friedman SM.
[31] See [37] above.
Financial hardship
Mr Tisdell says that his financial hardship amounts to a special circumstance. The Secretary says that Mr Tisdell’s financial situation is “not sufficiently dire”. I agree with Mr Tisdell. Leaving aside his home, as discussed above,[32] I think that his financial circumstances go beyond “straitened” and are “exceptional”.[33]
[32] See [49]–[54] above.
[33] See Colaiacolo and Secretary, Department of Social Security, unreported, Administrative Appeals Tribunal, Renouf M, 24 April 1985 at [20]. The Tribunal used these two terms, and decided that the circumstances were not exceptional in that case.
The Guide says that claims of financial hardship circumstances should be substantiated by documentation. I have already found that Mr Tisdell’s funds ran out in 2013, and that he has survived since then on the assistance of relatives and charities.[34]
[34] See [33] above.
The reasonableness of a person’s actions in disposing of a compensation payment is relevant to the question whether special circumstances arise.[35] Mr Tisdell has not been profligate or extravagant in his spending since he received the lump sum. He has not—to adopt the language of the Guide—deliberately deprived himself of his means of support or recklessly or inappropriately spent his lump sum.[36] He has not gambled his compensation money or spent it on holidays;[37] or on gifts for friends and other unnecessary purchases;[38] or otherwise “frittered” the money away.[39] On the contrary, Mr Tisdell would seem to have made prudent financial decisions, based on his misapprehension that the preclusion period ended in February 2012. He obtained financial advice. He used the lump sum in a sensible manner, and set aside sufficient funds to meet his living expenses during that (misapprehended) period. In fact, his funds lasted longer than he thought that they needed to: he first made enquiries about the DSP on 21 November 2013, 20 months after he thought he was entitled to apply.
[35] Martin and Secretary, Department of Social Security, unreported, Administrative Appeals Tribunal, McGirr SM, 14 November 1990 at [10]. See also Wilson and Director‑General of Social Services, unreported, Administrative Appeals Tribunal, Smith SM, 7 May 1981; (1981) 4 ALN N166.
[36] Guide, section 4.13.4.20, See, for example, Smith and Department of Families, Community Services and Indigenous Affairs [2012] AATA 262 at [21]–[22] per Cunningham SM.
[38] See, for example, Cooper and Secretary, Department of Social Services [2015] AATA 41 at [16]–[17] per Friedman SM.
[39] See, for example, Walker and Department of Family and Community Services [2002] AATA 71 at [75] per Isenberg M
Conclusion
Noting that the discretion in s 1184K(1) of the SS Act is a broad one,[40] I have decided that it is appropriate, in the special circumstances of Mr Tisdell’s case, to calculate the preclusion period on the basis that part of the compensation payment was not made. I have also decided that the amount of the lump sum that should be treated as not having been paid is the amount that will result in the preclusion period (calculated in accordance with s 1170) having ended on 20 November 2013.
[40] Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 162 per French J. See [36] and note 10 above.
In Secretary, Department of Employment and Workplace Relations v Homewood, the Federal Court explained that, in giving reasons for such a decision, this Tribunal is expected to:
1.Identify the circumstances of the case which it found to be “special” and the reasons for which it arrived at that finding.
2.Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.
3.Explain why it selected the particular quantum (i.e. the whole or part) of the compensation payment as not having been made.[41]
[41] (2006) 91 ALD 103 at 109–110 [34] per French J.
The circumstances of Mr Tisdell’s case that I have found to be special are the law firm’s wrong advice about the preclusion period, which caused Mr Tisdell’s belief that it ended in February 2012; his unexpected ill health; the impediments to him selling his home; and his financial hardship. My reasons for those findings are given in [40]–[54] and [59]–[61] above. I think that those circumstances are unusual, uncommon, unforeseen and exceptional, and markedly different from those in the usual run of cases.[42]
[42] See Beadle v Director‑General of Social Security (1984) 6 ALD 1 at 3 per Toohey J, Wilkins M and Billings M, as quoted in [35] above; and the Guide, section 4.13.4.10, as quoted in [36] above.
In those special circumstances, I think it appropriate to treat part of the lump sum as not having been paid to Mr Tisdell because he now finds himself in exceptionally difficult financial circumstances, even though he made prudent financial decisions based on his misapprehension about the length of the preclusion period. Treating part of the lump sum in this way will ameliorate the unfairness and injustice that would follow from the strict application of the SS Act.[43]
[43] See Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281 at 286 [22] per Mansfield J, as quoted in [37] above.
I think that so much of the lump sum should be treated as not having been paid to Mr Tisdell as will result in the preclusion period having ended on 20 November 2013. That is the day before Mr Tisdell contacted Centrelink about the DSP, his funds having run out. He thought that the preclusion period ended in February 2012. He behaved reasonably in using his lump sum so as to have sufficient funds to meet his living expenses until then. Even though he had to meet the costs of his unexpected ill health from his funds, those funds lasted longer than he thought was needed.
It follows that I must set aside the SSAT’s decision to reject Mr Tisdell’s claim for the DSP on the basis that the preclusion period had not ended. That does not necessarily mean that Mr Tisdell will be paid the DSP. Section 1169 of the SS Act provides that a compensation affected payment (like the DSP) is not payable during the preclusion period. My decision means that the preclusion period ended on 20 November 2013. The Secretary must now decide whether Mr Tisdell met the requirements for the DSP (which are set out in s 94(1) of the SS Act) when he lodged his claim or within 13 weeks after that date:[44] that is, during the period 4 December 2013 to 5 March 2014.
[44] Harris v Secretary, Department of Employment and Workplace Relations (2007) 158 FCR 252 at 253 [1] per Gyles J. See Administration Act, s 42 and clause 4(1) of Schedule 2.
I certify that the preceding 67 (sixty‑seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member Popple ..............................[sgd]..........................................
Associate
Dated 11 August 2015
Date of hearing 15 June 2015 Date final submissions received 30 June 2015 Counsel for the Applicant Ms Naomi Gould Solicitors for the Applicant Canberra Community Law Counsel for the Respondent Ms Amy Bartush Solicitors for the Respondent Legal Services Group,
Department of Human Services
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