Van Welsem and Secretary Department of Family and Community Servi Ces
[2003] AATA 557
•16 June 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 557
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2002/790
GENERAL ADMINISTRATIVE DIVISION ) Re BEVERLEY VAN WELSEM Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Ms JA Shead, Member Date16 June 2003
PlaceSydney
Decision The Social Security Appeals Tribunal decision of 30 April 2002 under review is affirmed.
[Sgd] Ms J Shead
Member
© Commonwealth of Australia 2003
CATCHWORDS
Social Security – compensation – preclusion period – “special circumstances” – decision affirmed
LEGISLATION
Social Security Act 1991 sections 17, 1170, 1184K
CASELAW
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64
Beadle v Director General of Social Security (1985) 60 ALR 225
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Haidar v Secretary Department of Social Security (1998) 28 AAR 288
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
Department of Social Security v Smith (1991) 30 FCR 56
Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876
Secretary, Department of Family and Community Services v Allan [2001] FCA 1160
Allan and Secretary, Department of Family and Community Services [2001] AATA 271
Stephens and Department of Family and Community Services [2001] AATA 108
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Secretary, Department of Social Security v Banks (1990) 20 ALD 19
Re Green and Secretary, Department of Social Security (1990) 21 ALD 772
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797
Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985)
Commonwealth of Australia v Daniels (1994) 33 ALD 111
Secretary, Department of Family and Community Services v Sammut (1999) 58 ALD 691
REASONS FOR DECISION
16 June 2003 Ms JA Shead, Member 1. This is an application for review to the Administrative Appeals Tribunal (“the Tribunal”) by Beverley Van Welsem (“Mrs Van Welsem”) of a decision of the Social Security Appeals Tribunal ("the SSAT") dated 30 April 2002 (T2). The SSAT affirmed a decision made by a Centrelink delegate of the Secretary of the Department of Family and Community Services (“the Respondent”) on 28 September 2001 (T23) to preclude payment of social security payments to Mrs Van Welsem for the period 9 May 1998 to 23 April 2010. This earlier decision was reviewed and affirmed by an Authorised Review Officer (“ARO”) on 25 October 2001 (T27).
2. By way of background, the Tribunal extracts the history of the matter from the SSAT decision (T2):
“1. Mrs Van Welsem was inured at work on 27 November 1993. She received regular payments of workers’ compensation until; 8 May 1998. On that day she was awarded $565,333 in a compensation claim.
2. The compensation claim included a component for loss of earnings and lost capacity to earn. Centrelink determined that Mrs Van Welsem should be precluded from receiving payments of social security for the period until 23 April 2010. This determination was made pursuant to the provisions of section 1165 of the Social Security Act 1991 (the Act).
3. Mrs Van Welsem applied to Centrelink for reconsideration of the decision. The application was broadly framed and challenged most of the legal bases. Reference was made to the provisions of section 1184 of the Act. This section allows a discretion to be exercised so that the normal preclusion period can be shortened where there are “:special circumstances”.. This application was refused. Centrelink argued that the circumstances were not ‘special’ within the meaning of the section.”
3. On 30 April 2002 the SSAT affirmed the decision of the ARO of 25 October 2001 and amongst the reasons for the decision of the SSAT decision were:
“27. One of the factors adduced by Mrs Van Welsem in support of her claim that there are special circumstances was the argument that her current medical condition is due in large part to non-accident injuries. While it may in some cases be appropriate to take account of this situation, the tribunal must have regard to the authorities that provide medical conditions and costs associated with non-accident conditions by themselves do not amount to special circumstances. The matter must be looked at in a global sense.
28. The tribunal is guided by the principles established in the cases referred to above and to others that are reported. The circumstances of Mrs Van Welsem are unfortunate. Many of her current medical problems have arisen independently of her accident. She does not have control over them and it seems will need increasing amounts of assistance with daily living in the future. However, the appeal herein involves submissions that Mrs Van Welsem’s problems are such that her husband should give up work and look after her. He cannot do that on their current income. One interpretation of the appeal is that it is to allow Mr Van Welsem to retire and look after his wife. On the evidence of Dr Stewart, the time has not eventuated when that development is necessary. While the husband is working, the circumstances of Mrs Van Welsem are not special within the meaning of section 1184. The tribunal does not mean to infer that if Mr Van Welsem was to give up work the circumstances would automatically achieve the required degree of speciality.”
4. The compensation preclusion period, lack of advice, ill health, and financial circumstances were briefly the reasons stated by the Applicant in the Application for Review to the Tribunal for review of the SSAT decision.
5. The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Tribunal Act 1975 (“the T documents”) (“the AAT Act”) and numbered T1 to T32.
6. Mrs Van Welsem’s solicitor Ms Jackie Finlay of the Welfare Rights Centre provided the Tribunal with a written Statement of Facts and Contentions dated 31 October 2002 and attachments A-F as referred therein. The Respondent’s advocate, Ms Hanne Schuster, also provided the Tribunal with a written Statement of Facts and Contentions dated 20 November 2002.
7. The matter before the Tribunal was determined having regard to the T-documents, the evidence and the case law.
Agreed Facts
8. The parties agreed to the facts as follows.
9. On 27 November 1993 Mrs Van Welsem was injured at work at the Mulawa Training and Detention Centre for Women. She was employed by Correction Health Service as a nurse. As a result of an assault she suffered injuries to her neck and left shoulder. She received weekly payments of workers compensation until 1998. Initially Mrs Van Welsem made a workers compensation claim, however it later became a Public Liability claim.
10. On 8 May 1998 Mrs Van Welsem was awarded $565,333.30 in her claim against the Department of Corrective Services in the District Court (T16 pp 72-73). The judgement included the following components:
Past economic loss $117,678.00
Reduced earning capacity $180,000.00
Future out of pocket expenses $70,000.00
Interest on past economic loss $ 20,145.30
11. An appeal was lodged against that judgement (T15 p 51). Due to the appeal only $100,000 was released, and Mrs Van Welsem received $26,000 of this.
12. In February 1999 Mrs Van Welsem approached the Respondent to inquire whether she could receive any assistance should the appeal against the judgement become protracted. In response the Respondent sent Mrs Van Welsem a disability support pension claim package (T4) and the Respondent made inquiries into Mrs Van Welsem’s compensation claim. In a letter dated 3 March 1999 the Respondent asked Mrs Van Welsem’s solicitor, Firths Compensation Lawyers, to provide information about her compensation claim (T7).
13. Mrs Van Welsem’s solicitor did not advise her of the existence of a compensation preclusion period.
14. In a letter to Mrs Van Welsem dated 3 March 1999, the Respondent advised that she may be precluded from receiving any social security payments in the future (T8).
15. On 24 March 1999 an offer was made to Mrs Van Welsem to discontinue the appeal against the judgement on the basis that each party bears its own costs of the appeal (T31 p141). Mrs Van Welsem subsequently agreed to this offer and therefore had to pay her solicitor’s legal costs of $5,610.
16. In a notice dated 14 April 1999 Mrs Van Welsem was advised that her claim for disability support pension was rejected as her solicitors had failed to provide the Respondent with information about her compensation claim (T12). Mrs Van Welsem did not pursue the disability support pension claim as the appeal had been discontinued.
17. Of the $563,333.30 Mrs Van Welsem was awarded, the amount of $167,878.48 was deducted to repay disbursements, medical expenses, and weekly workers compensation payments amounting to $61,699.79 received by Mrs Van Welsem from the date of the accident until the date of the judgement (T15 p 53).
18. In approximately July/August 1999 Mrs Van Welsem used the settlement monies to purchase her current home for $214,000, plus $14,844 in legal fees and stamp duty. Due to damage to the pool in the backyard it was filled in and a spa was installed, which has been used for hydrotherapy. These repairs and renovations cost $20,000. Mrs Van Welsem and her husband purchased whitegoods and furniture for $8,150.00, a $6,000 air-conditioning unit, and a second-hand car for $10,000. They also repaid $11,000 in loans from families.
19. On 12 June 2000 Mrs Van Welsem and her husband took out a home loan for $38,000 for home improvements and to help cover living expenses (T15 p 51).
20. Mrs Van Welsem ‘s husband works full-time, and often overtime, in order to meet their living expenses including substantial medical costs. For three months in early 2002 Mr Van Welsem was off work due to an injury. He was therefore not being paid for overtime, and they were using their credit cards to pay for bills. Mrs Van Welsem and her husband have recently borrowed $20,000 against their house in order to cover their bills.
21. In a notice dated 16 August 2001 the Respondent asked Mrs Van Welsem to provide information concerning her compensation payment (T14). This notice was sent to an incorrect address.
22. In a letter dated 3 September 2001 Mrs Van Welsem forwarded information to the Respondent concerning her compensation payment (T15).
23. On 11 September 2001 the Respondent imposed a compensation preclusion period from 9 May 1998 to 23 April 2010, which precludes Mrs Van Welsem from receiving social security payments during this period (T17).
24. On 24 September 2001 Mrs Van Welsem requested a review of the decision to impose a preclusion period (T21). In a letter dated 28 September 2001 the Respondent affirmed the decision (T23).
25. On 8 October 2001 Mrs Van Welsem requested an Authorised Review Officer review the decision (T13 p 47).
26. In a letter dated 25 October 2001 the Authorised Review affirmed the decision (T27).
27. On 13 December 2001 the Applicant appealed this decision to the Social Security Appeals Tribunal (SSAT) (T28). On 30 April 2002 the SSAT affirmed the decision (T2).
28. On 1 June 2002 Mrs Van Welsem lodged an application for review of the decision to the Administrative Appeals Tribunal (T1).
29. Mrs van Welsem has numerous health problems. A number of these are unrelated to her workplace injury.
30. For the first three months of every calendar year Mrs van Welsem has medical costs of nearly $600 per month. For the remaining nine months the costs are still over $300 per month.
31. In a report dated 5 February 2002, Dr Chamberlain, GP, listed Mrs Van Welsem’s medical conditions as chronic airways limitations, asthma, protruding discs causing low back pain and sciatic pain in legs, mild hypertension (controlled), high cholesterol, residual pain and limitations of movement in the left arm, hidradenitis, recurrent urinary tract infections and depression (T30). In relation to the chronic airways obstruction Dr Chamberlain reported it causes restrictions on her mobility due to shortness of breath on exertion, she is virtually housebound, uses a wheelchair when necessary, is dependent on her husband for transport and household assistance, and requires home oxygen. Dr Chamberlain further reported:
“Beverley has been found unconscious at home while alone a number of times, and has had numerous admissions for respiratory problems and ideally should not be alone for long periods.”
32. A report by Dr Stewart, Mrs Van Welsem‘s treating specialist for the chronic airways limitation, dated 22 February 2002, states (T31):
“Mrs Van Welsem has severe obstructive lung disease and has very limited effort tolerance. I first saw Mrs Van Welsem in April 2000 but her condition would have been present for several years.
Her condition has deteriorated since that time and her effort tolerance is now quite minimal. It probably limits her ability to perform many of the tasks of daily living.
It is highly likely that she will require considerable assistance within the next two years if there is any further deterioration.”
33. At paragraph 16 of their decision (T2) the SSAT found that Mrs Van Welsem does not require a full-time carer.
34. In a letter dated 24 June 2002, Dr Stewart commented on the findings of the SSAT at paragraph 16 (Attachment C to Applicant’s Statement of Facts and Contentions). He states:
“I would like to point out that my statement of Mrs Van Welsem’s condition referred only to her pulmonary disease and was not intended to include any other aspects of her clinical condition. While she does not require a full-time carer, her chronic lung condition would indicate that she is not be (sic) capable of carrying out many of the tasks of daily living. This would include many, if not all, of the normal activities normally associated with maintaining a house such as vacuuming or even operating a washing machine.”
LEGISLATION
35. A lump sum compensation payment, which includes any amount for lost earnings or lost capacity to earn, may prevent a person from receiving a Social Security payment for a set period of time, the “lump sum preclusion period” as per section 17(1) of the Social Security Act 1991 (“the Act”).
36. Sub-sections 17(3) and (4) of the Act determine the compensation part of a lump sum compensation payment, which is then used to calculate the preclusion period. Section 1170 then determines the length and start date of the preclusion period.
37. Section 1184K of the Act allows for a reduction in the preclusion period where it is appropriate to do so in the special circumstances of a case.
“Compensation part of a lump sum
17(3) Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a) 50% of the payment if the following circumstances apply:
(i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise; or
(ab) 50% of the payment if the following circumstances apply:
(i)the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form or a lump sum; and
(ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise; or
(b) if those circumstances do not apply—so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn, or both.
17(4) Where a person:
(a) has received periodic compensation payments; and
(b)after receiving those payments, receives a lump sum compensation payment (in this subsection called the "LSP"); and
(c)because of receiving the LSP, becomes liable to repay an amount (in this subsection called the Repaid Periodic Compensation Payment—"RPCP") equal to the periodic compensation payments received;
then, for the purposes of subsection (3), the amount of the lump sum compensation payment is:
LSP – RPCP”
“1170 Lump sum preclusion period
1170(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a)begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a)begins on the first day on which the person’s periodic compensation payment is a reduced payment because of that choice; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a)begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum Income cut-out amount
1170(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.”
“1184K Secretary may disregard some payments
1184K(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.
…”
APPLICANT’S CASE
Overview of Applicant’s Case
38. It was submitted that the discretion in section 1184K of the Act may be exercised where it is appropriate to do so in the special circumstances of the case. A line of Federal Court cases has established that the term “special circumstances” is intended to allow the decision maker the fullest opportunity to consider the particular circumstances of each case. The most recent of these cases is Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64.
39. 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: Beadle v Director General of Social Security (1985) 60 ALR 225 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570.
40. Section 1184K of the Act provides a means of alleviating the harshness of the statutory provision pertaining to lump sum preclusion periods 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) 28 AAR 288 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.)
41. 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 1184K to be used where the arbitrary nature of the 50% rule results in unfairness in a particular case.
Special Circumstances of Mrs Van Welsem’s case:
42. On behalf of Mrs Van Welsem, it was submitted there are a number factors in Mrs Van Welsem’s case that, when taken together, can be regarded as the special circumstances that make it appropriate to exercise the discretion in section 1184K. These factors include:
·the unfairness of the combined operation of the legislative provisions governing compensation;
·the change in divisor used to calculate preclusion periods;
·the lack of information/details given to the Applicant about the preclusion period; and
·the ill-health and substantial medical costs of the Applicant.
Unfairness of combined operation of the legislative provisions governing compensation
43. It was submitted that the combined effect of sections 17(3), 17(4) and 1170, in determining the Applicant’s preclusion period, results in unfairness such that it can be held that special circumstances exist.
44. The Tribunal was told that Mrs Van Welsem’s compensation matter was determined by a judgement where she was awarded the following amounts for loss of earnings:
Past economic loss $117,678.00
Future economic loss $180,000.00
Interest on past economic loss $ 20,145.30
Total $317,823.30
45. It was noted the judgement dictated Mrs Van Welsem was to repay $61,699.79 in periodic workers compensation payments received from the date of the accident until the award of the lump sum compensation. The application of the legislative provisions in her case meant that the amount of $256,123.51 was used from the date of the judgement, 9 May 1998, to determine a future preclusion period until 23 April 2010. The effect was that Mrs Van Welsem was without any income from the accident in 1995 until 1998. She received no Social Security payments and repaid the workers compensation, with the remaining $55,978.21 that the judge determined was past economic loss being used to calculate a future preclusion period.
46. In Kertland (supra), Merkel J said:
“In Smith, to which I will later return, von Doussa J rejected a contention put on behalf of the Secretary that the “circumstances of the case” should be confined to matters which are external to the operation of the statutory scheme. His Honour made the point, with which I respectfully agree, that a distinction cannot meaningfully be drawn between matters external to the operation of the scheme and matters which are the product of the strict application of the scheme.”
47. This view was endorsed by Mansfield J in Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876. Mansfield J stated:
“Indeed, in my view, s1184 is designed specifically to enable the respondent, and on review the Tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act.”
48. Ms Finlay on behalf of Mrs Van Welsem submitted that the majority of compensation cases are settled, rather than being determined by a Court. In these cases, she submitted, the Respondent is unlikely to have any capacity to determine what are past and what are future components of economic loss. In relation to Mrs Van Welsem’s case the Court gave a clear statement of intention as to the components of the judgement that applied to different periods of economic loss. The application of the legislative provisions provided a contrary result that was detrimental to the Applicant.
49. The purpose of the legislation is to prevent a person being doubly compensated by both workers compensation and the Social Security system for the same period of time. In the Applicant’s case she effectively received no income for the period 1995 until 1998.
50. It was also submitted that the combined effect of the legislative provisions has brought about an unfair, unjust and unreasonable result in this case that amounts to special circumstances pursuant to section 1184K.
The change in the divisor to calculate the preclusion period
51. Prior to March 1997 the divisor amount used to calculate preclusion periods was male average weekly earnings (at that time, about $570 per week). In March 1997 the divisor amount became the pension income test cut-off figure (at that time $402.20 per week). In July 1997 the pension income test cut-off figure substantially increased as part of the GST compensation package (at that time $534.63). It was one of a range of measures introduced “in order to compensate for the effects of the GST for low income earners…” (see the Explanatory Memorandum, A New Tax System (Compensation Measures Legislation Amendment) Bill 1998). If a person, such as Mrs Van Welsem, received a lump sum compensation between March 1997 and July 2000 they have a much longer preclusion period than those who received compensation before March 1997 and after July 2000.
52. At the time Mrs van Welsem was awarded her compensation the divisor was $410.00 and this resulted in a 624 weeks preclusion period. By comparison, if the preclusion period was calculated using the post-GST divisor of $543.00, Mrs Van Welsem’s preclusion period would have been 471 weeks, a reduction of nearly three years.
53. In reference to the impact of the GST, Heerey J in Secretary, Department of Family and Community Services v Allan [2001] FCA 1160 stated:
“A factor which applies to all, or a substantial part of, the community need not necessarily be excluded in considering the range of circumstances which affect an individual and whether those circumstances in total can be said to be “special”.”
54. In the matters of Allan and Secretary, Department of Family and Community Services [2001] AATA 271, and Stephens and Department of Family and Community Services [2001] AATA 108 the Administrative Appeals Tribunal (AAT) regarded the effect of the GST on the applicant’s cost of living as one the special circumstances in their cases. In Stephens (supra) Senior Member Hallowes noted that the GST has increased the cost of living and this is reflected in the more than $110.00 increase in the compensation divisor from 1 July 2000.
55. In conclusion Ms Finlay contended on behalf of Mrs Van Welsem that this is a relevant special circumstance in Mrs Van Welsem’s case.
The lack of information/details given to Mrs Van Welsem about the preclusion period
56. Mrs Van Welsem was awarded compensation in May 1998, however it was not until March 1999 that she was first advised a preclusion period might apply. Her private solicitor did not advise her about preclusion periods. Mrs Van Welsem bought a house in 1999 and spent the proceeds of the compensation within two years. It was not until August 2001 that the Respondent sought information about her compensation payment and then advised her of the twelve year preclusion period.
57. The lack of information provided, the failure by her solicitors and the Respondent to follow up the issue, the long delay before calculating and advising of the preclusion period are factors relevant to a consideration of special circumstances.
Ill-health and substantial medical costs
58. As detailed above Mrs van Welsem has numerous serious health problems, many which are unrelated to her workplace injury.
59. The chronic obstructive lung disease has had a significant impact on the Mrs Van Welsem’s life including additional medical costs and causing mobility restrictions. The additional medical costs include bottled oxygen at a cost of approximately $128 per month.
60. As Mrs Van Welsem does not have a Health Care Card, it is noted that not until she and her husband have spent $1,200 in a calendar year on medications can Mrs Van Welsem access medications on the Pharmaceutical Benefits Scheme for $3.60 per script. In the first three months of the 2002 calendar year Mrs Van Welsem spent nearly $600 per month on medications and medical aids, since then she has spent over $300 per month. The Tribunal was further told Mrs Van Welsem’s husband works up to seven days per week to cover their living costs which have significantly escalated due to the cost of medications.
61. Also it was submitted on behalf of Mrs Van Welsem that these additional severe health problems and their treatment costs are relevant special circumstances.
62. On behalf of Mrs Van Welsem it was contended that the SSAT misinterpreted her evidence, as recounted at paragraph 9 of their decision (T2, p8). Her evidence related to her need for household help. Due to her disabilities, including her mobility problems, she is unable to undertake many household tasks. As Mrs Van Welsem’s husband works six to seven days per week he has difficulties undertaking all the household tasks required. Mrs Van Welsem is able to attend to most of her personal needs. However she does require assistance to attend appointments, and is virtually housebound as she is unable to walk very far. It is contended that Mrs Van Welsem requires household assistance or financial assistance so her husband can work less hours to provide the assistance she requires.
63. It was also contended that it would be unfair and unjust to require Mrs Van Welsem to dispose of the family home and use the proceeds for her living expenses to the end of the preclusion period. This is particularly the case as the house was purchased prior to her receiving advice on the application and length of the preclusion period. The house was also purchased prior to the development of many of Mrs Van Welsem ‘s serious health problems that have involved substantial costs.
64. The presence of an asset does not in itself preclude the finding of special circumstances. The Tribunal was told that Mrs Van Welsem ‘s house is modest, and is well suited to her disabilities as it has no stairs and a spa for hydrotherapy.
65. In conclusion, it was contended that when taken together Mrs Van Welsem ‘s circumstances are special within the meaning of section 1184K of the Act and that it is appropriate to reduce the preclusion period.
RESPONDENT’S SUBMISSIONS
Compensation preclusion period
66. The Respondent notes that Mrs Van Welsem was awarded compensation payment of $565,333.30. Of that lump sum, $317,832.30 represented past and future economic loss as well as interest on past economic loss. It has not been disputed that this amount was the compensation part of the lump sum, as defined in section 17(3) of the Act. Repaid periodic payments of $61,699.79 were deducted (as per section 17(4) of the Act) giving an amount of $256,123.33 being the compensation part of the lump sum on which the preclusion period is based.
67. Pursuant to section 1170(1) the compensation preclusion period commenced on the day following the last day of periodic payments, 8 May 1998. The length of the preclusion period is calculated under section 1170(4) by dividing $256,123.33 by the ”income cut-out amount” (also knows as the divisor) of $410.00 to arrive at a period of 624 weeks, namely the period of 8 May 1998 to 23 April 2010.
Reduction of Preclusion Period
68. The Act provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard parts of the compensation payments in “special circumstances”: -
“1184 Secretary may disregard some payments
1184K (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.
…”
Special Circumstances
69. In Re Beadle and Director General of Social Security (1984) 6 ALD 1, Toohey J stated:
“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.”
70. Attempts have been made in various decisions of the Tribunal to specify a list of relevant factors to be taken into account as “special circumstances” in the exercise of the discretion under section 1184(1). Clearly, in the light of the Federal Court decisions of Hulls (supra), Smith (supra) and Secretary, Department of Social Security v Banks (1990) 20 ALD 19, such attempts can only be seen as providing guidance on the facts of the particular case concerned and cannot be elevated to the status of rules of general application. The relevant factors specified in the cases vary from factors couched in quite general terms to quite specific terms.
71. For example, in Re Green and Secretary, Department of Social Security (1990) 21 ALD 772, quoting from Re Ivovic and Director-General of Social Services (1981) 3 ALN N95, the Tribunal listed the factors in general terms as follows:
· “The use of the word “special” is “intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case”:
· “hardship is a relevant consideration” but regard must be had to the way in which the hardship arose;
· there must exist “factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes”;
· the decision-maker must have regard to whether, by exercising the discretion in a particular case he/she will be “achieving or frustrating ends or objects which are conformable with the scope and purpose of the Social Security Act”; and
· “the decision-maker must be prepared to respond to 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”..”
72. The Respondent contended that Mrs Van Welsem’s circumstances do not warrant the exercise of the discretion conferred by section 1184K of the Act. The Respondent submitted that circumstances must be unusual, uncommon or exceptional in order to be special, and they must be such as to justify making an exception to the general principle set out in the Act.
Financial Hardship
73. Mrs Van Welsem has claimed that the family is finding it difficult to manage on their available funds after spending the lump sum payment on a new property and associated expenditure.
74. Mrs Van Welsem was put on notice in March 1999 that she may face a preclusion period. She did not seek to persist with a claim lodged at that time and also appears to have sought no further advice about the preclusion. Several months later the bulk of the settlement monies were spent on the purchase of a house. Any hardship Mrs Van Welsem now faces is clearly not caused by the preclusion period, but rather by the Mrs Van Welsem’s own failure to make provision for future expenses.
75. Compensation payments were awarded for the purpose of assisting Mrs Van Welsem with future needs. Funds remain accessible, if only in the form of equity in the home.
76. Mrs Van Welsem’s family is not without means. While previously Mrs Van Welsem lived in rented accommodation, they now own their own home. Mrs Van Welsem ‘s husband is employed and earning sufficient money to support the family. The Respondent contends that Mrs Van Welsem does not suffer severe financial hardship.
77. To qualify as “special circumstances”, financial hardship must go beyond “straitened” circumstances and be truly exceptional. The Respondent contends that the Tribunal ought to decline to find special circumstances in a situation where Mrs Van Welsem has not exhausted her financial options.
Lack of Advice
78. Centrelink first advised Mrs Van Welsem about a possible preclusion period in March 1999. While this was some time after the settlement, it was well before the funds were spent on property. It was open to Mrs Van Welsem to seek further information or to urge her solicitor to provide sufficient information to Centrelink in order to enable a proper estimate to be given. Failure on her part to do so and failure to make provision for future needs is not a special circumstance warranting the exercise of the discretion.
Ill Health
79. It is not disputed that Mrs Van Welsem continues to suffer from the injuries she sustained in the accident and from her other medical problems.
80. The Tribunal in Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464 found that ill health alone is not enough to form a special circumstance. The Respondent notes that, invariably, recipients of compensation will have health problems.
81. In Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797 the Applicant, his wife and daughter all had considerable health problems. The Tribunal said, at paragraph 49, that this was not enough to find “special circumstances”:
“… 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 of Pt 3.14 becomes unjust or unreasonable”.
82. 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. The Tribunal found that there were no special circumstances.
83. The Respondent contends that while regular medical costs have been and continue to be incurred by Mrs Van Welsem, this is not a special circumstance, and any associated financial hardship is to some extent self-inflicted by Mrs Van Welsem’s failure to set aside some funds prior to purchasing the house, in order to cover future expenses.
84. The Respondent contends that health problems are not a special circumstance which would make it appropriate to exercise the discretion in this case.
Unfairness of the legislative provisions
85. The Respondent contends there is no unfairness in the operation of the legislative provisions. The formulae in the Act apply to all recipients equally and cannot be construed as especially unfair in the present case. To the extent that Mrs Van Welsem was compensated and had to repay periodic payments, this amount of compensation was deducted from the economic loss component.
86. The Respondent submitted that the amount of past economic loss in excess of periodic payments is part of the lump sum and is, under the normal operation of the Act, taken into account when calculating the compensation preclusion period. The normal operation of the Act is no more unfair in this particular case than in other comparable cases in which the legislature has seen fit to apply it. No special circumstance arises.
Change of Divisor
87. The same divisor applies in all cases where compensation preclusion periods have to be calculated in the same period. The Respondent contented that there is nothing special in this case about the divisor used in May 1998 - the same divisor was used for all preclusion period calculations for compensation preclusion periods commencing March 1998 to September 1998. Use of the correct divisor is not unusual or uncommon.
88. The Respondent contended that if the use of the normal divisor were to be found to be unusual in this case, without any factors that made its use in this particular case ‘special’, then presumably one could argue that special circumstances arose in each similar case and that any preclusion periods commencing in the particular period ought to have been shortened. It was submitted by the Respondent that this is completely contrary to the legislature’s intention that laws be carried out as enacted. Use of the divisor itself is not a special circumstance.
Purpose for which Discretion is Conferred
89. The Respondent submitted that the expectation underpinning the compensation regime is that a person will use part of a lump sum settlement to maintain themselves. It was contended that the object and purpose of the compensation legislation is to prevent ‘double dipping’, that is, being paid for the same period from two sources. The Respondent argued that conversion of all of the lump sum into substantial assets is contrary to the intent of the legislative scheme and should not be relieved by the use of section 1184K of the Act.
90. The Respondent contended that the purpose of the discretion conferred by section 1184K of the Act is not to assist those who put themselves in a position of being without living expenses for the remainder of a lengthy preclusion period while in possession of substantial assets. In this case, the Respondent submitted, the use of section1184K of the Act to shorten the preclusion period by eight years would frustrate the intent of the legislation and would place undue burdens on the public purse.
Respondent’s Summary
91. It is contended that the decision to end the preclusion period on 23 April 2010 should be affirmed.
CONSIDERATION
92. The legislation is designed to prevent settlements being manipulated to obscure the economic loss components and to avoid recovery of social security payments (von Doussa J in Banks (supra)).
93. The purpose of the legislation is to avoid a claimant being entitled to both social security benefits and benefits in the nature of income through lump sum payments (Hill J, Haidar (supra))
94. However the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184 of the Act, therefore, provides the means whereby the Secretary or, in the event of an appeal, this Tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances. In Smith (supra), von Doussa J, after commenting on the fact that a predecessor to section 1165 of the Act by its very arbitrary nature entailed a degree of unfairness, said:
"At the same time the legislature must have recognised that from time to time a case may arise where the degree of unfairness to a recipient of a payment by way of compensation would bring about an unreasonable or unjust result which was outside that which could be justified by the practical expediency of the arbitrary nature of the [provision]." (Emphasis added)
95. The decision maker must be satisfied that the circumstances of the case, viewed objectively will result in an unjust result if the discretion is not exercised and having regard to the purpose of the legislation (Neaves J in Commonwealth of Australia v Daniels (1994) 33 ALD 111, at page 115).
96. Consideration needs to be given to all of the circumstances of an application which alone or cumulatively produce a result where the application of the 50% multiple produces a result which is unfair, unjust, unreasonable or otherwise inappropriate (Neaves J in Commonwealth of Australia v Daniels (supra) ; Re Ivovic (supra); Branson J in Secretary, Department of Family and Community Services v Sammut (1999) 58 ALD 691).
97. Turning to address the submission in paragraph 45 of this statement of Reasons for Decision, that Mrs Van Welsem received no Social Security payments, the workers compensation was repaid and the remaining $55,978.21 which the judge determined was past economic loss, was used to calculate a future preclusion period, the Tribunal finds that, howsoever called, the remaining $55,978.21 is a “loss of earnings or lost incapacity to earn, or both” and if, as is submitted on behalf of Mrs Van Welsem, it were excluded from the calculation, it would result in Mrs Van Welsem “double dipping”.
98. Mrs Van Welsem’s also Application raises a question as to the proper construction of section 1165(5) of the Act which relevantly provides:
“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).”
99. The above provision clearly states that the preclusion period begins on the last day of the periodic payment period. Kertland (supra), was a case where no periodic payments were received and that the applicable provision was section 1165(7) of the Act. The then Tribunal had decided to apply a preclusion period 18 months after the day on which loss of earnings or earning capacity began, and upon appeal Merkel J stated:
“ … there is no discretion or power under the Act to determine that the preclusion period began on any day other than 24 September 1994, being the day on which loss of earnings or loss of incapacity began …”
100. Having regard to the agreed facts of Mrs Van Welsem’s case and as set out in the documents, the Tribunal finds that the lump sum preclusion period is that specified by section 1165(5) of the Act and that the preclusion period is 9 May 1998 to 23 April 2010.
101. Concerning the lack of advice, as noted by the agreed facts (paragraph 18 of this statement of Reasons for Decision), it seems that Mrs Van Welsem was at least aware of the preclusion period before the purchase of her current home.
102. The Tribunal agrees with the submissions on behalf of the Respondent that the change in the divisor on account of GST does not operate unfairly in respect of Mrs Van Welsem, and so it is not unusual or uncommon.
103. Concerning financial hardship, the SSAT noted that Mr Van Welsem is in full time employment and the Tribunal notes he continues in that employment. Ms Finlay’s letter dated 19 December 2002 noted that Mrs Van Welsem’s husband, Mr Peter Van Welsem’s taxable income for the past four years was: $48,246, $44,367, $37,685 and $39,814, and also attached three recent pay slips showing a gross fortnightly pay of $1,198.26 to $1,944.08. It also noted that the household fortnightly expenses were $1,061.08. Mrs Van Welsem estimated their current assets at $377,846 and liabilities of $59,000. Having regard to those brief financial details, the Tribunal finds that their financial affairs appear manageable and Mrs Van Welsem does not suffer financial hardship in terms of the case law.
104. The Tribunal accepts that Mrs Van Welsem’s health has deteriorated since the receipt of the settlement moneys and the majority of her conditions are unrelated to her workplace injury. The Tribunal agrees with the SSAT that “[W]hile it may in some cases be appropriate to take account of this situation, the tribunal must have regard to the authorities that provide that medical conditions and costs associated with non-accident conditions by themselves do not amount to special circumstances. The matter must be looked at in a global sense.” (T2 p 15).
105. Overall and on balance, the Tribunal is not satisfied that there are special circumstances as to warrant reduction of the preclusion period. Accordingly It follows from the foregoing reasons, that the SSAT decision of 30 April 2002 under review is affirmed
I certify that the 105 preceding paragraphs are a true copy of the reasons for the decision herein of Ms JA Shead, Member.
Signed: L Bonouvrie
AssociateDate of Decision 16 June 2003
Solicitor for the Applicant Ms Jackie FinlaySolicitor for the Respondent Self-represented
0
10
0