Vernon and Secretary, Department of Education, Employment and Workplace Relations

[2008] AATA 513

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 513

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2006/1585

GENERAL ADMINISTRATIVE DIVISION		)
Re		GARY VERNON

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Senior Member, Mrs Josephine Kelly

Date19 June 2008

PlaceSydney

Decision

The reviewable decision to reduce Mr Vernon's disability support pension from 16 August 2006 by directly deducting the periodic compensation payment he receives is set aside and the matter remitted to the Respondent for reconsideration in accordance with my findings.

The reviewable decision to recover the amount that Mr Vernon received by way of disability support pension during the period from 16 to 31 August 2006 is varied so as to include a requirement that the Respondent account to Mr Vernon to show that he has not repaid the debt twice, and if he has, the respondent is to credit his account with the amount of the overpayment.

....................[sgd]..........................

Senior Member
  Mrs Josephine Kelly

CATCHWORDS

SOCIAL SECURITY – Disability support pension - Periodic compensation payment –  Whether periodic compensation payment should be disregarded in part – Whether deduction of gross periodic compensation payment constitutes special circumstance – Whether medical conditions constitute special circumstances – Whether allegedly incorrect advice from Centrelink constitutes special circumstances - Held there are special circumstances – Reviewable decisions varied to reduce deduction of periodic compensation to the extent that allows the applicant to qualify for the pensioner concession card and to require accounting for possible double repayment of debt and to credit any amount overpaid

Social Security Act 1991, ss 1173, 1184K

Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64

Re Secretary, Department of Employment and Workplace Relations and Dalby (2005) 87 ALD 223

Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147

REASONS FOR DECISION

19 June 2008 Senior Member, Mrs Josephine Kelly     

1.      Mr Gary Vernon was injured at work on 16 September 2003.  He received compensation payments for the injury until 19 May 2005, and was then paid Newstart allowance until he was granted disability support pension (DSP) on 5 December 2005.

2.      He settled his workers' compensation claim in relation to his injury on 15 August 2006.  The settlement included an ongoing weekly payment of $300 and a lump sum payment of $57,900, which included arrears of weekly payments.

3.      On 10 October 2006 the Social Security Appeals Tribunal (SSAT) affirmed two decisions made by Centrelink on 31 August 2006 and 4 September 2006:

a) to reduce Mr Vernon's disability support pension from 16 August 2006 by directly deducting the periodic compensation payment he receives, and

b) to recover the amount of $689.47 he received by way of disability support pension during the period from 16 to 31 August 2006.

4.      Mr Vernon seeks the review of those decisions.  We note that there are other references to the $689.47 figure being $682.86.  It seems that the debt was recalculated to the latter amount on 4 September 2007.  In any case, the amount in issue is the amount received by Mr Vernon between 16 and 31 August 2006.

ISSUES

5.      It was conceded by Mr Hodges, who appeared for Mr Vernon, that the legislative provisions of the Social Security Act 1991  (the Act) have been correctly applied in the case in relation to both decisions.  In particular, it was conceded that s 1173 of the Act was correctly applied, such that sub-sections 1173(1) and (2) have the effect that his DSP payment is reduced dollar for dollar by the amount of Mr Vernon's gross periodic compensation payment.

6.      The issues are whether there are circumstances which would cause the Tribunal to decide to disregard part or all of Mr Vernon's periodic compensation payment as not having been made or liable to be made, pursuant to the provisions of s 1184K of the Act, and also whether or not it should require the Respondent to account to Mr Vernon in relation to his repayment of the debt for the period 16 to 31 August 2006 to show whether or not he has effectively repaid the debt twice, and if he has, to credit the overpayment to his account.  I did not understand Mr Hodges to press an argument that the debt should be waived.

THE LEGISLATION

7.      Section 1173 of the Act provides:

1173  Effect of periodic compensation payments on rate of person’s compensation affected payment

(1)  If:

(a)  a person receives periodic compensation payments; and

(b)  the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and

(c)  the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the rate of the person’s compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).

(2)  The person’s daily rate of compensation affected payment is reduced by the amount of the person’s daily rate of periodic compensation.

(3)  The reference in subsection (2) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.

(4)  If:

(a)  a person receives periodic compensation payments; and

(b)  at the time of the event that gave rise to the entitlement of the person to compensation, the person was qualified for, and was receiving, a compensation affected payment; and

(c)  the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the periodic compensation payments are to be treated as ordinary income of the person for the purposes of this Act

8.      The effect of this provision is that where a person is not receiving a "compensation affected payment" when the entitlement to compensation arises, the  periodic compensation payments are deducted dollar for dollar, whereas if the person was receiving a "compensation affected payment" when the entitlement to compensation arose, a lesser amount is  deducted.  That is, in Mr Vernon's case, in general terms he is worse off than someone who was receiving a compensation affected payment when that person's entitlement to compensation arose.

9.      Section 1184K(1) of the Act 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.

…

THE CASE FOR MR VERNON

10.     The case for Mr Vernon changed in three respects by the time  of the hearing.  The first matter was that Mr Vernon's compensation payments had increased because they had become indexed, rather than being in accordance with the Compensation Commission's ruling.  At the time of the hearing he was receiving $700 per fortnight gross, and $648 after tax, which was about the same as the full DSP rate plus rent assistance.  Before the hearing he had received less than the full DSP rate.  

11.     The second matter was that I understood that before the hearing Mr Vernon had been receiving a small amount of DSP, in the order of $5.80 a week and was entitled to, what was referred to in the T documents p 67 as, a "pension health care card", however, at the time of the hearing Mr Vernon said that he was not receiving any DSP and consequently had no entitlement to the card.

12.     The third matter was that Mr Vernon had told the SSAT that he had asked Centrelink about how his compensation payments would be treated and had been told that they would be treated "as ordinary income", rather than being deducted dollar for dollar.   He had taken that into account when agreeing to the settlement of his claim and consequently had been disadvantaged.  He said that if he had known how the payment would be treated, that is, that the full amount of his periodic compensation would be deducted, he would have made a common law claim.  Mr Vernon's evidence at the hearing about the telephone conversations he had had with Centrelink officers resulted in Mr Hodges requesting that the matter being adjourned in order to try to locate Centrelink records that supported his evidence. The Tribunal received the relevant Centrelink records on 31 January 2008 and some additional records on 13 February 2008.

13.     In summary, Mr Hodges argued that the following were special circumstances:

·the fact that Mr Vernon is in a significantly worse situation than someone who  receives the DSP only, because of  associated benefits which he does not receive;  

.Mr Vernon has high medication expenses and cannot afford other needs arising from his medical condition;

.          Mr Vernon suffers from various medical conditions including disthymia;

.the combination of the above which, on the evidence of Dr Roberts, psychiatrist, seems to be leading to a permanently pessimistic outlook, feeling of helplessness and increasing dependency on his parents.

14.     Mr Hodges also relied on Mr Vernon's evidence about having received advice from Centrelink officers as another relevant circumstance, although he conceded that it would depend on the specific questions asked.  However, even if Mr Vernon was confused about the advice he had received, he had still acted upon that advice.  Mr Vernon had given up a common law claim and accepted the compensation settlement, at least in part because of Centrelink's advice.

15.     Mr Hodges dealt with the fact that Mr Vernon has invested the lump sum part of his Compensation payment, in the order of $57,000, by saying that he was not urging that there was financial hardship in the long term, but rather that Mr Vernon suffered disadvantage in his current week to week situation.

16.     Mr Hodges argued that the reason behind the compensation provisions in the Act is to ensure that persons in receipt of compensation payments do not “double dip”. They are:

...designed to prevent a person from being entitled to receive social security benefits in respect of a period during which the person receives, or is entitled to receive, personal injury compensation for loss of earnings or earning capacity (Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 65).

17.     His main point was that the compensation provisions were not intended to result in any person being worse off.   He referred to cases which he argued supported the proposition that the possible impact of tax can be considered in relation to special circumstances.  He relied on the case of Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 as authority for the proposition that the impact of GST could be taken into account as a special circumstance. He also referred to Re Secretary, Department of Employment and Workplace Relations and Dalby (2005) 87 ALD 223, which he said did not cavil with that proposition but did distinguish the facts there under consideration.

18.     His proposition was that the unfair, unjust or anomalous impact of taxation provisions can be taken into account remains unchallenged.

19.     Mr Hodges sought two "orders".  The first was that pursuant to s 1184K, the sum of $100 be disregarded from the weekly workers' compensation payments.   I understood that the submission actually meant deducting the $100 from a fortnight's entitlement.  That would achieve an increase which would ameliorate the taxation disadvantage suffered by Mr Vernon.  

20.     The second "order" sought by Mr Hodges was that the respondent provide to Mr Vernon an accounting for the debt repayment he has made showing the source and amount of each payment received. In the event that more than the debt amount has been recovered, such difference to be credited to Mr Vernon's.   This order was sought because it appeared that the Respondent had recovered, or partly recovered, the debt of $682.86 twice. That is, by way of deductions from the payments due to the applicant and also from a compensation charge directed to the insurance company.

CONSIDERATION

21.     The strength of Mr Vernon's case has been somewhat reduced by the change in his period payments, which means he is relatively better off than he was.  Mr Hodges' principal argument at the end of the day was that there are benefits associated with DSP which Mr Vernon is missing out on, or if he wishes to have those benefits he has to pay for them at normal cost. 

22.     On the evidence, including that of Dr Roberts, Mr Vernon suffers a number of health problems and has various disabilities.  He uses various medications which are expensive.  He receives no rent assistance, although he pays rent to his parents with whom he lives.  Until about the beginning of 2006, he had been in a relationship for 12 years, and as I understand it, had been living with his partner and her children during that time.    He gave evidence about the expenses he incurs, his limited ability to do things, his limited social life, his reliance on his parents, and  the medical costs he cannot afford, for example having a CT scan in relation to a deep vein thrombosis in his leg.

23.     He also has three longstanding debts to thee financial institutions for a total of about $6,300.  I did not understand the reason he gave for not repaying these debts when he received his lump sum payment.

24.     Mr Vernon said that he needed his investment, his "superannuation" as he called it, for his future when he foresaw various health problems arising.

CONCLUSION

25.     The central argument in Mr Vernon’s case is the adverse effect of s 1173 of the Act.   In my opinion, that there is a dollar for dollar deduction of periodic compensation when calculating the DSP payable in Mr Vernon’s circumstances is the clear and intended consequence of the legislation.  It is therefore not a matter which I consider is a special circumstance in Mr Vernon's case.   I do not consider that this is a case like Allan which considered the impact of the goods and services tax (GST).  There the Tribunal found as a fact that a change in a compensation divisor   reflected compensation for those on low incomes for the GST.  I accept that a factor is not excluded from falling within s 1184K of the Act because it applies to all or a substantial part of the community (see Allan at paragraph [18]). However, in this case it is the consequence of the clear intention of the legislation that is said to be a special circumstance.

26.     Mr Vernon's settlement of his compensation claim included a term which required the employer to pay Mr Vernon's medical treatment in relation to his injury.   Mr Vernon's evidence was somewhat unclear, but I infer that some at least of his medication is paid by the insurer.  He does however have a number of other costly medications to pay for.

27.     It is not clear to me, on the evidence, how accessible Mr Vernon's investment funds are.  However, he made the decision to invest those funds, on advice, within a couple of months of settlement. He is in a better financial position than many other recipients of social security benefits.  This is a relevant  factor when considering whether his circumstances  fall within s 1184K.

28.     The Centrelink records showing Mr Vernon's contacts with Centrelink about his compensation entitlement reveal that those enquiries were made after the settlement had occurred, rather than before.     Mr Vernon gave evidence that he felt he was forced to settle at the hearing of his compensation claim.  That would be consistent with his not having made inquiries before the settlement.   I make no adverse finding about Mr Vernon's evidence. The matter of the dollar for dollar deduction was clearly important to him when he became aware of it.  I find that  Mr Vernon's recollection is not an accurate one.

29.     Taking all of Mr Vernon's circumstances into account, I am persuaded that there are special circumstances such that I would exercise the discretion conferred by s 1184K of the Act, but only to the extent, if necessary, that entitles Mr Vernon to receive what is referred to it in the T documents as the "pension health care card", that is, that he qualifies for DSP.  In particular, I take account of Mr Vernon's poor health and consequential expenses incurred for medication and related expenses.   

DECISION

30.      The reviewable decision to reduce Mr Vernon's disability support pension from 16 August 2006 by directly deducting the periodic compensation payment he receives is set aside and the matter remitted to the Respondent for reconsideration in accordance with my findings.

31.     The reviewable decision to recover the amount that Mr Vernon received by way of disability support pension during the period from 16 to 31 August 2006 is varied so as to include a requirement that the Respondent account to Mr Vernon to show that he has not repaid the debt twice, and if he has, the respondent to credit his account with the amount of the overpayment.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member,
Mrs Josephine Kelly.

Signed: …………[sgd]..………..

Steven Mulipola, Associate

Date of hearing:  24 January 2008

Date of final submissions:             14 February 2008

Date of decision:  19 June 2008

Solicitors for the Applicant:           Stephen Hodges Solicitors

Solicitors for the Respondent:      Centrelink Legal Services