Vladimir Basic v Secretary, Department of Employment and Workplace Relations

[2007] AATA 35

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 35

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2006/475

GENERAL ADMINISTRATIVE DIVISION		)
Re		VLADIMIR BASIC

Applicant

And SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Dr KS Levy, Senior Member

Date24 January 2007

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

.................[Sgd].............................

Senior Member

CATCHWORDS

SOCIAL SECURITY – Disability Support Pension – lump sum compensation payment – preclusion period – special circumstances - decision affirmed

Administrative Appeals Tribunal Act 1975 (Cth)

Social Security Act 1991 (Cth) s17, 1169, 1170, 1884K

Beadle v Director-General of Social Security (1985) 60 ALR 225
Groth v Secretary, Department of Social Security 1995 40 ALD 541
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Re Frelek and Secretary, Department of Family and Community Services (2005) 86 ALD 772

REASONS FOR DECISION

24 January 2007   Dr KS Levy, Senior Member        

The Application

1.      The applicant, Vladimir Basic, originally worked in the Northern Territory and received a workplace injury in 1990.  He was retained by his employer until 1993 and then retrenched.  He sought compensation for those injuries and for a period received some compensation payments.  Those payments ceased on 30 December 2004 and the applicant was granted Disability Support Pension by Centrelink on 24 January 2005.

2.      A Deed of Agreement was signed by the applicant on 20 December 2005 whereby he received a lump sum compensation payment of $190,000 (T21, folio 50-54).  As a consequence, Centrelink determined on 23 January 2006 that the applicant would be subject to a lump sum preclusion period commencing 21 January 2006 and ceasing on 19 September 2008 (T24, folio 57).  The applicant and his solicitors were advised of this decision. 

3.      On 21 February 2006, Mr Basic again applied for Disability Support Pension.  On 23 February 2006 that claim was rejected on the basis that the preclusion period had not expired (T29, folio 65).  On 24 February 2006 Mr Basic requested a review of that decision.  On 27 February 2006, the original decision maker affirmed the decision. 

4.      On 1 March 2006, Mr Basic requested that the decision be reviewed by an Authorised Review Officer (“ARO”).  On 21 March 2006 the ARO determined that the original decision should be affirmed (T40, folios 79-85).  The applicant then appealed to the Social Security Appeals Tribunal which, on 19 April 2006, also affirmed the original decision. 

5. Mr Basic has applied for a review of that decision to this Tribunal under s 29(1) of the Administrative Appeals Tribunal Act 1975.  He was granted an extension of time in which to lodge an application for review under s 29(7) of that Act. 

6.      The applicant was self represented, together with the assistance of an interpreter.  The respondent was represented by Ms Jasmine Forsyth. 

Issues

7.The questions for the Tribunal are:

(a)Is Mr Basic subject to a lump sum compensation preclusion period?

(b)Is any preclusion period correctly calculated?

(c)Are there any “special circumstances” such that the compensation payment (in whole or in part) could be regarded as not having been made and as a consequence, should the preclusion period be reduced or eliminated?

Evidence

8.The following documents were admitted into evidence:

·Exhibit 1 T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975

·Exhibit 2    Secretary’s Statement of Facts and Contentions dated 20 October 2006

·     Exhibit 3   Letter from Dr Klug dated 2 October 2006

·     Exhibit 4   Letter from Dr Klug to Dr Ting dated 25 May 2004

·     Exhibit 5   Letter from Dr Klug to Territory Insurance Office dated 25 May   2004

·     Exhibit 6   Applicant’s letter to Centrelink dated 23 February 2006

·     Exhibit 7   Treating Doctor’s report (by Dr Ting) dated 23 February 2006

·     Exhibit 8   Letter from Dr Ting to Dr Klug dated 23 February 2006.

9.      The applicant gave evidence with the assistance of an interpreter.  It became apparent however, that Mr Basic’s command of the English language was adequate for a good part of the time, but some support to the applicant and the Tribunal was provided by the interpreter from time to time. 

Mr Basic

10.     The history shows that Mr Basic originally worked in the Northern Territory, received a workplace injury in 1990 and was ultimately retrenched in 1993.  The applicant worked in the mines.  In 1994 he moved to Brisbane with his family.  He purchased a house but then he and his wife separated around 1997.  The house was sold in 2002 for about $156,000.  He bought a house on the Gold Coast but this too was sold in 2005 to pay off all his debts.  He then gambled a lot of money and was declared bankrupt in 2005.  The applicant said in oral evidence that he has now lost two houses and that he now lives with his children.  He explained he has health problems and for a period, could not walk straight.  He has had suicidal thoughts and visions of God.  He also told the Tribunal he needs medical attention for an ulcer and has eye and back problems. In addition, he suffers from anxiety and depression.

11.     In cross-examination Mr Basic said that he had received $190,000 for his workplace injury of which, he cleared $178,920.47.  He agreed part of this was for economic loss.  He told the Tribunal he had no idea that it would affect his Disability Support Pension until after the settlement.  He signed the agreement on 20 December 2005. 

12.     The applicant referred to his health problems and said he could not be treated by the public system because of the delay in the waiting lists.  When discussing how the compensation payment had been used, he told the respondent’s advocate that on 18 April 2006, he had $145,032.45.  On the day of the hearing in this application, he had $83,653.35.  This was used for medication, specialists, accommodation, telephone and electricity.  The applicant said that he was now more stressed that his former employer would not look after him and the Disability Support Pension had been withdrawn.  He told the Tribunal he had a superannuation from the company which covered the period 1970 to 1993 and said that was worth $27,000. 

13.     In relation to his gambling addiction, he told the respondent’s advocate that he had not tried to get counselling or assistance for this problem.  However, he claimed he was not bankrupt because of gambling but because of stress and financial circumstances. 

Findings of Fact

14.     Having considered all of the evidence presented the Tribunal has made the following findings of fact:

(a)The applicant Vladimir Basic is 59 years old;

(b)Mr Basic had an adequate understanding of English to participate in the hearing, with some support from an interpreter;

(c)The applicant received personal injuries at his workplace on 11 October 1990;

(d)The applicant was paid fortnightly and then weekly compensation payments until 30 December 2004;

(e)On 24 January 2005, Mr Basic was then granted Disability Support Pension;

(f)Mr Basic’s claim for compensation settled out of Court for a lump sum of $190,000 on 20 December 2005;

(g)The lump sum settlement included economic loss as part of that amount;

(h)The solicitors advised the applicant and spoke to him about his claim.  He was represented by solicitors in Darwin and Town Agents in Brisbane.  The Tribunal is satisfied that he had an adequate comprehension of English to understand the ramifications of the settlement;

(i)The applicant had a history of gambling prior to the settlement and was declared bankrupt in 2005;

(j)In the seven month period from April to November 2006, the applicant spent $61,000 approximately of his lump sum compensation payment.  Of that amount about $50,000 was lost in gambling; 

(k)The applicant has neither sought or obtained any treatment for his gambling addition;

(l)The applicant has medical conditions which affect his eyes and his back.

Consideration

15.     The Tribunal has taken into account all of the relevant statutory and case law and factual evidence in arriving at a decision in this matter. 

16.     The facts of this case highlighted that Mr Basic has multiple medical conditions and was highly anxious at the hearing.  He made a number of emotive pleas for help. 

17.     In answering the questions which the Tribunal must determine, the relevant legislation is the Social Security Act 1991 (“the Act”).  The purpose of the relevant provisions of the legislation is to preclude double compensation for the same injury – once from an employer through an insurance scheme and then a second time from taxpayers’ funds (consolidated revenue).  The three questions for determination are determined as follows:

Is Mr Basic subject to a lump sum compensation preclusion period?

18.     The applicant signed a Deed of Agreement on 20 December 2005, which was in full and final settlement for his workplace injuries. 

19. In relation to the relevant provisions of the Act, the following applies to the applicant:

(a)He received a Disability Support Pension – a “compensation affected payment” (s 17(1)).

(b)He received payment in settlement of a claim under an insurance scheme in the Northern Territory (s 17(2)).

20.Section 1169(1) is also relevant and provides:

“Sect 1169 - Compensation affected payment not payable during lump sum preclusion period

1169(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.”

21. Therefore, the applicant has received both a “compensation affected payment” and a “lump sum compensation payment”. He is therefore not entitled to a compensation affected payment (Disability Support Pension) for any part of the “lump sum preclusion period” as provided for in the Act. The applicant is therefore subject to a lump sum preclusion period.

Is any preclusion period correctly calculated?

22.The relevant statutory law to answer this question is as follows:

Sect 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:

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.

23. The term “compensation part of lump sum” and “income cut off amount” are defined in section 17 as follows:

“Compensation part of lump sum” is defined as follows:

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 judgment 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 of 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 judgment 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.”

24.Income “cut out amount” is defined in s 17(1) as:

“In relation to a person who has received a compensation payment, means the amount worked out using the formula in sub-section (8), as in force at the time when the compensation was received”.

25.Applying the formula in s 1170(4) the lump sum preclusion period is:

$95,000  ¸  $680.38   =   139.62 weeks

In accordance with s 1170(5), the preclusion period is therefore 139 weeks.

26.The period for which the preclusion period is to run, is set out in s 1170(3) above. The period starts on 21 January 2006. The period would end 139 weeks later, that is 19 September 2008.

27.I find the preclusion period determined was correctly calculated. 

Are there any “special circumstances” such that the compensation payment (in whole or in part) could be regarded as not having been made and as a consequence, should the preclusion period be reduced or eliminated?

28.Section 1184K relevantly provides:

“Sect 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.”

29.     The provision, if deemed to be appropriate to apply in a particular case, would have the effect of reducing the amount of the compensation payment (in whole or in part) and as a consequence, reducing the duration of the lump sum preclusion period (in whole or in part).

30.     “Special circumstances” as a concept is not one that is to be viewed narrowly. The Full Federal Court said of the term “[w]e do not think it is possible to lay down precise limits or precise rules,” but it depends on the facts of each case (Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228). It would need to be an extraordinary case and some unfairness or unjustness would need to be present (Groth v Secretary, Department of Social Security (1995) 40 ALD 541 per Kiefel J).

31.     Considering that the objective of the legislation is to ensure an applicant cannot have the benefit of lump sum compensation from an insurance scheme plus social security payments from the Commonwealth, an extraordinary case would need to be demonstrated. This would require circumstances such as a paucity of resources which, if Disability Support Pension payments were not also received, then the person would be placed in such a difficult existence that would be unfair, unjust or that the person would lack essential needs, such as medication.  

32.     Here the case is quite different.  The respondent submitted that the principle to be adopted is that set out by Heerey J Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 where his Honour said at 148:

“The basic policy, understandably enough, is that there should not be ‘double dipping’.  People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source.”

33.     The Tribunal agrees with that submission.  The applicant in this case received a lump sum compensation and now also seeks Disability Support Pension. In considering the application, the Tribunal has noted that Mr Basic has demonstrated a pattern of gambling significant monies, both previously and from the lump sum payment involved in this application.

34.       I think this case is to be distinguished from cases such as ReFrelek and Secretary, Department of Family and Community Services (2005) 86 ALD 772, where an applicant with severe spinal injuries had converted a compensation payment into a fixed asset (by buying a house). That action enabled him to provide for his young family for the future, although he then did not have sufficient liquid assets to feed and to educate his children for the preclusion period. That case highlights the conversion of liquid assets from a lump sum payment into a fixed asset which was likely to save the taxpayer in the longer term.

35.     In the present case, the applicant’s evidence was that he accepted that part of the payment was for economic loss.  There is also evidence on the papers that the applicant was aware well in advance of signing the Deed of Agreement of the consequences of accepting the lump sum payment.  A letter dated 24 May 2005 from the Darwin Lawyers, Priestley’s to the applicant indicates that if he accepted the then offer of $180,000 then some previous pension amounts would be recoverable and that he would be precluded from claiming benefits for a period in the future.

36.       Likewise, on 24 August 2005, Mr Basic’s Brisbane solicitors wrote to his solicitors in Darwin indicating the applicant had instructed his Brisbane solicitors to accept the (then) latest offer of $190,000 made by the insurer.  He also wanted to know how much he would receive in cash from the settlement before he signed a Deed of Agreement (T2, folio 8-9). 

37.     The applicant stated in evidence that his solicitors in Darwin were against him.  The Tribunal is not satisfied that that is credible evidence or that it is consistent with all of the other evidence.  The applicant had access to written advice and personal contact with his solicitors and it is apparent that he had telephone communication with his Brisbane solicitors also.  It is clear that negotiations were underway at least seven months before he finally signed the Deed of Agreement.

38.       The Tribunal is conscious of the fact that the applicant has medical problems with his eyesight and his back.  However, the Tribunal is also satisfied that the present financial circumstances had their etiology in the applicant’s gambling addiction.  The lump sum payout of $190,000, which, after payment of legal and other obligatory payments, resulted in the applicant receiving $178,920.47 in January 2006 (T32, folio 68 and Exhibit 2 paragraph 43).  Between January and April 2006, the balance was reduced to $145,032.  Between April and 30 November 2006, the date of the hearing, the balance was reduced to $83,653.35 (a reduction of $61,000 approximately for the seven month period).

39.The applicant explained his expenses were as follows:

Medication  - $100 per month  $700
Rent - $150 per week or $600 per month  $4,200
Electricity - $100 per three months  $300
Mobile phone - $100 per month  $700

Total  $5,900

40.     There were other medical expenses of $500 which the applicant stated he could not recover.  It is noted that food is not included in the above amounts.  The applicant was asked even if his expenses were $10,000 for the seven month period where the other $50,000 was spent.  He said that he had to “socialise” and that he went to the Casino.  He admitted that he had gambled a substantial part of that balance in the seven month period.

41.     It is clear that the applicant sold a house on the Gold Coast in 2005 to pay off his debts.  After clearing his debts he subsequently gambled between $50,000 and $100,000 and was later bankrupted that year (T2, folio 8).  He now has had the benefit of a lump sum payment as a result of a work place injury and has already, by his own evidence, also gambled away a significant amount of that lump sum.  He also admitted that he has sought no treatment for his gambling behaviour.

42. In these circumstances, it seems to the Tribunal that this state of affairs was a choice that the applicant made. It was not unavoidable and was not due to misfortune outside his control. While the applicant has “health problems”, his financial position does not reveal that he could not, with budgetary assistance, be able to cope with his medical expenses for the remainder of the preclusion period. The Tribunal is not satisfied that this amounts to “special circumstances” as envisaged by the Act.

43.The Tribunal affirms the decision under review.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, Senior Member

Signed:         .....................................................................................
  Legal Research Officer

Date/s of Hearing  30 November 2006
Date of Decision  24 January 2007
The Applicant   was self represented
For the Respondent                  Ms J Forsyth, Departmental Advocate