Vincent Gifford and Secretary, Department of Social Services
[2014] AATA 873
•21 November 2014
[2014] AATA 873
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/1997
Re
Vincent Gifford
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member CR Walsh
Date 21 November 2014 Place Perth
The Tribunal sets aside the decision of the Social Security Appeals Tribunal, dated 11 September 2013, and substitutes that decision with the decision that it is appropriate to treat the amount of $44,000 for legal costs, including disbursements, which was paid to Mr Gifford by consent judgment in the District Court of Western Australia, as not having been made pursuant to s 1184K of the Social Security Act 1991.
...(Sgd) C R Walsh..................
Senior Member CR Walsh
CATCHWORDS
SOCIAL SECURITY – disability support pension – lump sum compensation payment – 50% rule – lump sum preclusion period – “special circumstances” discretion – it is appropriate to treat the payment of legal costs, including disbursements, as not having been made - decision under review set aside and substituted
LEGISLATION
Social Security Act 1991 (Cth) – s 17(1)(c) - s 17(2)(a) – s 17(3) – s 17(3)(a) – s 17(5) – s 17(8) – s 23 – s 1169 – s 1169(1) – s 1170 – s 1170(4) – s 1170(5) – s 1171 - s 1184K(1) – s 1237AAD
Social Security Act 1947 (Cth) – s 153 – s 156
Social Security (Administration) Act 1999 (Cth)
Workers Compensation and Injury Management Act 1981 (WA)
CASES
Beadle v Director-General of Social Security (1985) 60 ALR 225
Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Deacon and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 88
Dranichnikov v Centrelink [2003] FCAFC 133
Fuller and Secretary, Department of Family and Community Services [2004] AATA 615
Groth v Secretary, Department of Social Security [1995] FCA 989; (1995) 40 ALD 541
Keech and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 147
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Ivovic and Director General of Social Services [1981] AATA 57
Secretary, Department of Employment and Workplace Relations v Homewood [2006] 91 ALD 103
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Whitlock (2010) 126 ALD 550
Secretary, Department of Social Security v Banks (1990) 23 FCR 416
Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Secretary, Department of Social Services v Simpson [1993] AATA 552QX99C and Department of Family and Community Services [1999] AATA 310
SECONDARY MATERIALS
Guide to Social Security Law – Pt 4.13.2.30 - Pt 4.13.4.10 – Pt 4.13.4.20
REASONS FOR DECISION
Senior Member CR Walsh
21 November 2014
INTRODUCTION
This application concerns whether:
(i)the sum of $44,000 in legal costs, including disbursements, should be included in Mr Gifford’s “lump sum compensation payment” for the purposes of calculating Mr Gifford’s “lump sum preclusion period” (i.e. from his disability support pension (DSP)) under s 1170 of the Social Security Act 1991 (SSA); and
(ii)the Tribunal should, pursuant to s 1184K(1) of the SSA, treat all or part of Mr Gifford’s “lump sum compensation payment” as not having been made as it is appropriate to do so in the “special circumstances” of Mr Gifford’s case.
FACTUAL & PROCEDURAL BACKGROUND
Mr Gifford was involved in a workplace accident, injuring his leg and ankle, on 19 April 2008.
In the period from 19 April 2008 to 24 December 2010, Mr Gifford received weekly compensation payments totalling $183,260.00, pursuant to the Workers’ Compensation and Injury Management Act 1981 (WA) (WCIMA).
In 2009, Mr Gifford commenced an action against his employer, D & S Behsman Pty Ltd, claiming damages for personal injury, in the District Court of Western Australia (being District Court Action No. 3058 of 2009).
From 25 December 2010 to 11 February 2013 Mr Gifford received DSP from Centrelink totalling $48,212.94.
On 31 January 2013, Mr Gifford’s District Court damages claim against D & S Behsman Pty Ltd was settled by consent judgment as follows:
WE THE PARTIES to this action consent to judgment being entered for the Plaintiff [i.e. Mr Gifford] against the Second Defendant [i.e. D & S Behsman Pty Ltd] for the sum of $200,000, exclusive of weekly payments made to date pursuant to the [WCIMA], plus legal costs in the sum of $44,000 inclusive of disbursements. [Emphasis added]
In addition, D & S Behsman Pty Ltd agreed to reimburse the workers’ compensation insurer, Allianz Insurance, for the amount of $137,500.
It is common ground that Mr Gifford was not paid the full amount of $381,500 (comprising $200,000 in damages, $44,000 for legal costs and disbursements and $137,500 for the amount reimbursed to the workers’ compensation insurer, Allianz Insurance).
On 21 February 2013, Centrelink wrote to Mr Gifford advising him that his DSP had been cancelled as a result of his “compensation settlement” and that he could not get a pension “until after 20 September 2013”. Also on 21 February 2013, Centrelink wrote to Mr Gifford advising him of the following decision (Original Decision):
We are writing to let you know about the effect your lump sum compensation payment has had on your eligibility for income support payments from Centrelink. We have been advised that you are entitled to receive a lump sum compensation payment of $381,500.00. As a result, we have calculated that you have a preclusion period that starts on 25 December 2010 and will end on 21 March 2014. During this period you are not able to receive income support from Centrelink. You have already received $48,212.94 in this period and it must be repaid. We have asked CGU INSURANCE LTD (GENERAL) to repay this amount to us before they pay you the rest of your compensation payment. We are authorised to request this under social security law. This letter is a notice of decision. [Emphasis added]
On 5 March 2013, Mr Gifford sought internal review of the Original Decision.
On 5 August 2013, an ARO affirmed the Original Decision (ARO Decision). The ARO Decision states:
· The Department [i.e. Centrelink] was informed by Allianz Australia Insurance on 6 February 2013 that on 6 February 2013 [Mr Gifford] obtained a lump sum payment for the sum of $381,5[0]0 (sic.).
· The lost earnings or lost capacity to earn component of [Mr Gifford’s] settlement was $143,500.50.
On 21 August 2013, Mr Gifford sought review of the ARO Decision by the SSAT and on 11 September 2013, the SSAT set aside and substituted the ARO Decision with the decision that:
(i)Mr Gifford is required to serve a “lump sum preclusion period” commencing on 25 December 2010 and ending on 20 September 2013 (i.e. instead of ending on 21 March 2014, as per the Original Decision and the ARO Decision);
(ii)The decision to cancel Mr Gifford’s DSP from 11 February 2013 is correct (affirmed); and
(iii)The decision to recover a charge of $48,212.94 (relating to payments of DSP received by Mr Gifford in the period from 25 December 2010 to 11 February 2013) is correct (affirmed).
In other words, Mr Gifford’s application for review before the SSAT was partly successful (SSAT Decision).
On 15 April 2014, Mr Gifford applied to this Tribunal for a review of the SSAT Decision. His stated “Reasons for Application” are:
1. The [SSAT] has erred in fact and/or law in refusing to treat the whole, or alternatively part, of the compensation payment received as not having been made, in accordance with section 1184K of the [SSA], when it ought have done so in the special circumstances of the Applicant’s case.
2. The [SSAT] has erred in fact and/or law in including the amount awarded for legal costs and disbursements in the compensation amount.
ANALYSIS
The provisions governing the impact of compensation payments on social security payments, including DSP, are contained in Pt 3.14 of the SSA, titled “Compensation recovery”.
Compensation affected payment
Of particular relevance is s 1169(1) of the SSA, which provides that a “compensation affected payment” is not payable during a “lump sum preclusion period”. Section 1169(1) of the SSA states:
1169 Compensation affected payment not payable during lump sum preclusion period
(1) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
The compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period. [Emphasis added]
Broadly, the purpose of s 1169(1) of the SSA is to prevent a person from receiving both compensation and social security benefits in respect of the same period and thus to eliminate “double dipping”.
Section 17(1)(c) of the SSA defines the phrase “compensation affected payment” to include a “social security benefit”, which phrase is in turn defined in s 23 of the SSA to include DSP.
Accordingly, the DSP payments that Mr Gifford received in the period from 25 December 2010 to 11 February 2013 (totalling $48,212.94) are “compensation affected payments” within the meaning of s 17(1)(c) of the SSA.
Compensation
The term “compensation” is defined in s 17(2)(a) of the SSA to include a lump sum payment of damages:
that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. [Emphasis added]
It is not in dispute that the amount of $200,000 in damages awarded to Mr Gifford by consent judgment in the District Court was “compensation” within the meaning of s 17(2)(a) of the SSA as it represented a payment for damages which was wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury, which included a component for past or future economic loss. According to the ARO Decision, the “lost earnings or lost capacity to earn” component of the $200,000 in damages awarded to Mr Gifford was $143,500.50.
In such circumstances, s 1169 of the SSA applies to preclude Mr Gifford from receiving DSP (being a “compensation affected payment”) for the duration of the applicable “lump sum preclusion period”, as defined in s 1170(4) and (5) of the SSA: see paragraphs 33 to 39 below.
Mr Gifford contends that the amounts which were paid out of the total amount awarded to him by consent judgment in the District Court (of $381,550) include:
· $48,212.94 in DSP repayments to Centrelink;
· $25,000 in legal costs to Stephen Browne Lawyers, being the personal injuries lawyers Mr Gifford initially instructed to assist him with his damages claim in the District Court;
· approximately $95,000 in the repayment of his loans (of about $4,000 and $5,000, respectively) to Ask Finance and Financial Express; and
· a repayment to Medicare from a 10% advance payment.
As stated above, it is common ground that not all of the $381,550 awarded to Mr Gifford by consent judgment in the District Court was in fact “received” by Mr Gifford. However, it is the Secretary’s contention that the $44,000 in legal costs, including disbursements, which were awarded to Mr Gifford by consent judgment are to be included in Mr Gifford’s “lump sum compensation payment” for the purpose of calculating his “lump sum preclusion period” under s 1170 of the SSA. According to the Secretary, this is because s 17(5) of the SSA provides that a person “receives compensation”: “whether he or she receives it directly or whether another person receives it, on behalf of, or at the direction of the first person”. Mr Gifford disputes this. This is issue is considered below.
Compensation part of a lump sum compensation payment
Section 17(3)(a) of the SSA provides that the “compensation part of a lump sum compensation payment” is “50% of the payment” if the payment was made, as is the case here, in settlement of a claim that is related in whole or in part to a disease, injury or condition, and the claim was settled by consent judgment (commonly referred to as “the 50% rule”).
As stated above, the Secretary’s contention is that the “compensation part of a lump sum payment” in Mr Gifford’s case is $122,000, being 50% of the gross lump sum damages amount of $200,000 plus the legal costs, including disbursements, of $44,000.
In contrast, Mr Gifford argues that the legal costs, including disbursements, of $44,000 should not be included in the “compensation part of a lump sum payment” on the basis that the consent judgment comprises two separate and distinct payments, namely one lump sum payment of $200,000 for damages made “wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury” (within the definition of “compensation” in s 17(2)(a) of the SSA) and another payment of $44,000 for legal costs and disbursements associated with Mr Gifford’s damages claim in the District Court. Consequently, Mr Gifford contends that the “compensation part of a lump sum payment” in his case is $100,000, being 50% of the $200,000 lump sum payment for damages for personal injury.
The issue of whether the legal costs should be included or excluded from a “lump sum compensation payment” for the purposes of the SSA has been the subject of a number of decisions in the Federal Court and in this Tribunal. A number of these decisions found that legal costs should be included in the “lump sum” compensation payment (with an emphasis on the phrase “lump sum” rather than on the word “compensation”): see, for example, Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 422 – 424 per von Doussa J (which case was decided in the context of s 153 of the Social Security Act 1947 (1947 Act), being the predecessor of s 17(3) of the SSA), which decision was followed in Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 at 580 581 per O’Loughlin J and Secretary, Department of Social Security v Cunneen [1997] FCA 1033; (1997) 78 FCR 576 at 581 – 584 per Foster J.
More recently, in Fuller and Secretary, Department of Family and Community Services [2004] AATA 615, Downes J (the former President of this Tribunal) referred extensively to the Federal Court’s decisions in Banks, Hulls and Cunneen in deciding whether legal costs should be included in a “lump sum compensation payment” for the purposes of the 50% rule in s 17(3) of the SSA. At [22] and [23], his Honour decided in comity with those decisions to follow them:
22.The decisions in Banks [i.e. Secretary, Department of Social Services v Banks (1990) 23 FCR 416; 20 ALD 19; 12 AAR 38; 56 SSR 762], Hulls [i.e. Secretary, Department of Social Services v Hulls [1991] FCA 121; 22ALD 570; 13 AAR 414; 60 SSR 834] and Cunneen [i.e. Secretary, Department of Social Services v Cunneen [1997] FCA 1033; 78 FCR 576; 149 ALR 665; 48 ALD 251; 3(3) SSR 36] have stood for many years. The earliest is 14 years old and the latest is nearly 7 years old. Although their Honours’ observations are strictly obiter so far as the issue in this case is concerned they do seem to me to address the identical question of statutory construction. I am not prepared to depart from that construction and I prefer in comity with them to follow it.
23.Section 1171 of the [SSA] deems two or more lump sum payments to be one lump sum in circumstances defined in the section. Consistently with Banks, Hulls and Cunneen I have decided that there is only one lump sum in the present case.[1]
[1] Neither party in this case raised s 1171 of the SSA, titled “Deemed lump sum payment arising from separate payments”, as a matter for consideration by the Tribunal.
In Fuller, Downes J discussed (at [15], [27] and [29]) the unfairness of Centrelink’s practice in relation to the inclusion of legal costs in the amount of compensation where the settlement was “inclusive of costs” but not where the settlement was “plus costs”. Downes J recommended (at [15]) that legal costs be uniformly excised from the settlement and suggested (at [27] and [29]) that the unfairness should be addressed by an exercise of the discretion in s 1184K of the SSA. This issue is considered further below under the heading “Special circumstances”.
Part 4.13.2.30 of the Guide to Social Security Law (Guide), titled “Compensation Part of Lump Sum – 50% Rule”, states:
In order to calculate the lump sum preclusion period, the compensation part of a lump sum payment for the same compensable event must be determined. The 50% rule deems half the lump sum payment as being the compensation part in ALL cases where:
The lump sum payment is received as SETTLEMENT of a claim, including as a consent judgment, as an interim payment, or a redemption of periodic payments, AND
· All or part of the payment is for:
o Lost earnings, OR
o Lost capacity to earn.
Applying the 50% rule to a lump sum payment
The 50% rule is applied to the gross lump sum for the same compensable event. The only allowable deduction is periodic compensation that must be repaid because of the lump sum payment. The gross lump sum depends on the terms of the award or settlement. The following table shows how the 50% rule is applied in various situations. [Emphasis added]
According to the table in Part 4.13.2.30 of the Guide, if the terms of the settlement specify that the lump sum “Includes an ADDITIONAL amount for legal and/or medical costs”, then the 50% rule “applies to the total lump sum payment including the additional amount”.
It is well-established that in the exercise of its review function, the Tribunal should take into account any relevant statement of governmental policy which is consistent with the statute concerned, unless the policy is unlawful or there are cogent reasons not to do so: Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 645 per Brennan J.
It is acknowledged that there does seem to be some merit to Mr Gifford’s contention that a payment of legal costs and disbursements is not a payment “wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury” and thus is not a payment of “compensation” (as that term is defined in s 17(2)(a) of the SSA) and, it follows, is not an amount which should be included in the “lump sum compensation payment” for the purposes of the 50% rule in s 17(3) of the SSA. However, following the Federal Court’s approach in Fuller, and the earlier Federal Court cases cited therein (including Banks, Hulls and Cunneen), and paragraph 4.13.2.30 of the Guide, the Tribunal finds that the amount of $44,000 for legal costs, including disbursements, should be included in Mr Gifford’s “lump sum compensation payment” for the purposes of the 50% rule in s 17(3) of the SSA.
Lump sum preclusion period
Section 1170 of the SSA sets out how a person’s “lump sum preclusion period” is to be calculated. In particular, s 1170(4) of the SSA provides that to work out the number of weeks in a “lump sum preclusion period” the “compensation part of a lump sum payment” is to be divided by the applicable “income cut-out amount”
The phrase “income cut out amount” is defined in s 17(1) of the SSA for the purposes of s 1170(4) of the SSA is the amount worked out using the formula set out in s 17(8) of the SSA, as in force at the time when the compensation was received.
The applicable “income cut-out amount” in this case is $848.60.
Consequently, the number of weeks in Mr Gifford’s “lump sum preclusion period” is 143.76 weeks, being $122,000 divided by $848.60.
Section 1170(5) of the SSA then requires this number to be rounded “down” to the nearest whole number, namely 143 weeks in Mr Gifford’s case.
Therefore, pursuant to s 1170(1)(a) of the SSA, Mr Gifford’s “lump sum preclusion period” will commence on 25 December 2010, being the day following the last day of the periodic payment period and, pursuant to s 1170(1)(b) of the SSA, will end at the end of 143 weeks from 25 December 2010, being 20 September 2013.
Subject to the Tribunal’s findings below in relation to the application of the “special circumstances” discretion s 1184K of the SSA in this case, Mr Gifford’s “lump sum preclusion period” was correctly calculated by the SSAT, in the SSAT Decision, pursuant to s 1170 of the SSA.
Special circumstances
Section 1184K(1) of the SSA allows the Secretary (and, in his shoes, the Tribunal) to treat the whole or part of a compensation payment as not having been made to a person if it is appropriate to do so in the “special circumstances” of the case. In which case, the “lump sum preclusion period” is either reduced or abrogated such that the person recovers their entitlement to the relevant pension or allowance.
The discretion to disregard the receipt of a compensation payments under s 11184K of the SSA is in substantially similar terms to the discretion to waive social security debts in “special circumstances” under s 1237AAD of the SSA.
The expression “special circumstances” is not defined in the SSA, but has been considered on many occasions by the Federal Court and Tribunal. Broadly, it has been held for circumstances to constitute “special circumstances” they must be circumstances which are “unusual, uncommon or exceptional”, are “markedly different from the run of cases”, “special” or “out of the ordinary” and includes “events which would render the (strict application of the rule in question) unfair or inappropriate”: see for example, Re Ivovic and Director General of Social Services [1981] AATA 57 at [45]; Re Beadle and Director-General of Social Security (1984) 6 ALD at 3 per Toohey J; Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228; Groth v Secretary, Department of Social Security [1995] FCA 989; (1995) 40 ALD 541 at 545 and Dranichnikov v Centrelink [2003] FCAFC 133 at [66] per Hill J.
Part 4.13.4.10 of the Guide states that is not possible to give a precise list of factors that should be taken to account when considering whether “special circumstances” exist. It then proceeds to consider some of the situations in which “special circumstances” should generally not be applied. This includes where the person acquired realisable assets after the person was advised of the preclusion period and there is no impediment to the realisation of those assets. Part 4.13.4.20 of the Guide suggests that where a person has deliberately deprived themselves of their means of support or recklessly or inappropriately spent their lump sum, to amount to “special circumstances”, the person’s financial circumstances would need to be worse than the majority of social security recipients.
There have been many decisions, including Federal Court decisions, which have considered former s 156 of the 1947 Act, which was in substantially similar terms to s 1184K of Pt 3.14 of the SSA (and former s 1184 of the SSA). For example, in Secretary, Department of Employment and Workplace Relations v Homewood [2006] FCA 779; 43 AAR 236; 91 ALD 103; 8(3) SSR 23 at [34], French J (as he then was) stated that the determination of “special circumstances” for the purposes of Pt 3.14 of the SSA the Tribunal would be expected to apply the following three stage process: (i) identify the circumstances of the case which it found to be “special” and the reasons for which it arrived at that finding; (i) explain why, in the special circumstances so found, it though it appropriate to treat the whole or part of the compensation payment as not having been made; and (iii) explain why it selected the particular quantum (i.e. the whole or the part) of the compensation payment as not having been made.
In Fuller, Downes J commented that inclusion of legal costs in a “lump sum compensation payment” can cause the deemed 50% economic loss component of such a payment to be artificially inflated. Downes J stated (at [15]):
If a claim is settled at an early stage the costs will be small and the impact on the lump sum preclusion period slight. However, if the respondent resists the same claim until the last minute so that substantial costs are incurred by the applicant and those costs are agreed to and agreed to be paid then, event thought the actual amount of compensation is identical, the preclusion period will be longer. The applicant will suffer financially from the respondent’s resistance to a valid claim……….if a settlement is reached inclusive of costs, whether those costs are separately identified or not, the [Secretary’s] practice has been for the total figure to be treated as a the lump sum compensation payment. However, if a matter is settled on the basis that costs are to be paid subsequently, after being assessed, then the preclusion period is calculated without reference to the costs because to do so would result in hardship because the lump sum cannot be released until the preclusion period is calculated. This is a most capricious result.
Further, in Fuller, Downes J suggested (at [27]) that this “unfairness” should be addressed by exercising the discretion in s 1184K of the SSA:
…….If hardship is a basis for the exercise of such a discretion [i.e. the discretion in s 1184K of the SSA] it seems to me that unfairness must also be a basis for the exercise of hat discretion. Section 1184K is not confined to hardship. Moreover, being treated unequally can be hardship. Where the costs agreed in a settlement are a genuine assessment of those costs it seems to me that there is an unfairness arising out of the different way in which applicant are treated. I do not see any reason why in a case in which an agreed sum of costs is a genuine assessment of those costs the applicant should not be treated in the same way as an applicant who is a party to a settlement where the costs are subsequently agreed to or assessed. Indeed, well advised applicants would probably seek to negotiate a figure with costs to be agreed on assessed in the future even if those costs were agreed very shortly after the settlement was reached.
His Honour recommended (at [29]) that legal costs routinely be excised a “lump sum compensation payments” when calculating a person’s “lump sum preclusion period”:
I accordingly propose to remit the matter to the Secretary….for reconsideration in accordance with a recommendation that consideration be given to the question whether, by parity with its practice of calculating preclusion periods without regard to the amount of costs to be paid when those costs are not agreed at the tie of settlement, a decision should be made in the present and all similar cases, where there is no reason to doubt the genuineness of the assessment of costs, by which those costs are not taken into account in calculating the lump sum preclusion period.
The approach suggested by Downes J in Fuller, to exclude the legal costs from a lump sum compensation payment for the purpose of calculating a person’s lump sum preclusion period, was adopted by DP Hack SC in Deacon and Secretary, Department of Families, Housing, Community Service and Indigenous Affairs [2009] AATA 88; 11(1) SSR 3 at [18] – [20] and in other decisions of the Tribunal, including QX99C and Department of Family and Community Services [1999] AATA 310 and Keech and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 147.
In this case, there is no reason to question the genuineness of the assessment of the $44,000 in legal costs, including disbursements, which were awarded to Mr Gifford by consent judgment in the District Court. Following the reasoning of and approach recommended by Downes J in Fuller, and the decisions which have followed Fuller, the Tribunal finds it appropriate to treat the $44,000 in legal costs, including disbursements, which were awarded to Mr Gifford by consent judgment in the District Court as not having been made to Mr Gifford pursuant to s 1184K of the SSA with the result that those costs do not form part of the “lump sum compensation payment” for the purpose of the 50% rule calculation in s 17(3) of the SSA and determining Mr Gifford’s “lump sum preclusion period” under s 1170 of the SSA. It follows that the compensation part of the lump sum compensation payment in Mr Gifford’s case is $100,000 (being 50% of the gross lump sum damages payment of $200,000, excluding the legal costs and disbursements payment of $44,000) and that the number of weeks in his lump sum preclusion period (rounded down to the nearest number) is 117 weeks (being $100,000/$848.60 = 117.84).
Mr Gifford’s loans from Ask Finance and Financial Express
Mr Gifford explained to the Tribunal that he engaged Stephen Browne Lawyers in late 2009/early 2010 to advise him about making a claim for damages in the District Court. Mr Gifford stated that he was advised by Stephen Browne Lawyers that his District Court damages claim would be finalised within approximately six months and that he would receive about $500,000 in damages from that claim. Mr Gifford explained that in early 2010 he took out two loans of approximately $4,000 and $5,000 with Ask Finance and Financial Express, respectively, to help him through financially difficult times. Mr Gifford said that he assumed, based on the advice of Stephen Browne Lawyers, he would be in a position to repay his two loans within six months from the damages he would receive from his District Court damages claim. However, this is not what happened. Instead, the District Court damages claim took almost three years to resolve and Mr Gifford was only awarded $200,000 in damages plus $44,000 costs, inclusive of disbursements. By this time, the total about owing on both loans was approximately $95,000 as a result of them both being high interest loans (and the only loans he could get at the time). Mr Gifford said that he was not required by Ask Finance and Financial Express to make repayments on the loans over the three year period concerned and that he subsequently repaid the amount outstanding on the two loans (of approximately $95,000) out of the $200,000 damages payment.
Mr Gifford argues that such circumstances constituted “special circumstances” for the purposes of s 1184K of the SSA and that an amount of approximately $95,000 should be excluded from his lump sum compensation payment of $200,000 for the purposes of calculating his lump sum preclusion period.
No documentary evidence of Mr Gifford’s loans from Ask Finance and Financial Express was provided. Mr Gifford said that the two loans were arranged for him by his then lawyers, Stephen Browne Lawyers, on the basis that he would receive a compensation payment from his damages claim in the District Court. No evidence was given by Stephen Browne Lawyers to substantiate this assertion.
Even if it was the case that Mr Gifford was given incorrect legal advice by Stephen Brown Lawyers in relation to his District Court damages claim, this is not by itself sufficient, based on the case law on “special circumstances” and the relevant paragraphs of the Guide (referred to above in paragraphs 42 and 43), for “special circumstances” to exist making it appropriate to exercise the discretion in s 1184K of the SSA in relation to Mr Gifford’s two loans of approximately $95,000: see Secretary, Department of Social Services v Simpson [1993] AATA 552. Incorrect legal advice is generally capable of redress by a client taking action directly against his or her negligent solicitor: see Secretary, Department of Social Security and Bolton (1989) 18 ALD 464.
Other expenses
Mr Gifford asserts that after his other financial obligations had been met out of his $200,000 damages payment he only received approximately $38,000 from his $200,000 damages payment, leaving him in straightened financial circumstances. The other expenses Mr Gifford contends were paid for out of his $200,000 damages payment include:
·The purchase of a car for between approximately $6,000 and $10,000;
·Payment of $8,000 in loans to family members (although he said that there was no pressure placed on him by his family to repay this amount);
·Payment of $3,000 in overdue private school fees for his children;
·Payment of $1,000 for the purchase of 3 television sets, 2 for himself and 1 for his ex-partner and children;
·Payment of $4,000 on a car for his ex-partner; and
·Payment of $700 on clothing on himself and his children.
Based on the relevant case law and paragraphs of the Guide referred to above under the heading “Special circumstances”, the Tribunal considers that it would not be appropriate in Mr Gifford’s particular case to exercise the “special circumstances” discretion in s 1184K of the SSA so as to treat any of the above payments as not having been made for the purposes of determining Mr Gifford’s lump sum preclusion period under 1170 of the SSA.
DECISION
For the above reasons, the Tribunal sets aside the SSAT Decision and substitutes that decision with the decision that it is appropriate to treat the amount of $44,000 for legal costs, including disbursements, which was paid to Mr Gifford by consent judgment in the District Court of Western Australia, as not having been made pursuant to s 1184K of the SSA: refer to paragraph 49 above.
57.
58. I certify that the preceding 56 (fifty six) paragraphs are a true copy of the reasons for the decision herein of Senior Member CR Walsh.
…(Sgd) T Freeman….....
Dated 21 November 2014
Date of hearing
Representative for the Applicant
13 November 2014
Mr A Stewart
Solicitors for the Applicant Chapmans Barristers & Solicitors Representative for the Respondent Ms S Vahala Solicitors for the Respondent Australian Government Solicitor
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