Wakefield and Secretary, Department of Social Services (Social services second review) - [2020] AATA 873

Wakefield and Secretary, Department of Social Services (Social services second review) [2020] AATA 873 (20 April 2020)
Division:GENERAL DIVISION
File Number(s): 2019/4640
Re:Robert Wakefield
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

Decision
Tribunal:Chris Puplick AM, Senior Member
Date:20 April 2020
Place:Sydney

The decision under review is affirmed.
.....................[sgd].........................................
Chris Puplick AM, Senior Member
Catchwords
SOCIAL SECURITY – disability support pension – application for payment – lump sum compensation preclusion period – length of preclusion period – whether special circumstances exist to reduce preclusion period – meaning of special circumstances – decision under review affirmed
Legislation
Social Security Act 1991 (Cth) ss 17, 1160, 1169, 1170, 1184K
Social Security Amendment Act 1988 (Cth)
Cases
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Austin and Secretary, Department of Social Services [2014] AATA 516
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov v Centrelink [2003] FCAFC 133
Gartside and Secretary, Department of Social Services (Social services second review) [2017] AATA 45
Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339
Haidar v Secretary, Department of Social Security (1998) 52 ALD 255
Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Hammelswang and Secretary, Department of Social Services [2015] AATA 905
In the Marriage of Philippe (1997) 4 Fam LR 153
Jess v Scott and Others (1986) 70 ALR 185
Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569
William Griffiths and Secretary, Department of Social Security [1992] AATA 123
Winterbotham and Secretary, Department of Social Security [1990] AATA 808
Secondary Materials
Minister’s Second Reading Speech, House of Representatives Hansard, 13 April 1988
REASONS FOR DECISION
Chris Puplick AM, Senior Member
20 April 2020

Mr Robert Wakefield (the Applicant) has applied to this Tribunal for a review of a decision by the Social Services and Child Support Division of the Tribunal (AAT1) made on 10 July 2019. That decision affirmed an earlier decision of the (then) Department of Human Services (the Respondent) made on 29 April 2019, to reject the Applicant’s application for payment of the Disability Support Pension (DSP).
The basis of the Department’s rejection of the claim was that the Applicant was precluded from receipt of DSP because he was in receipt of compensation following a serious motor vehicle accident in May 2005.
The hearing, on 14 April 2020, was under restrictions imposed due to health and safety reasons related to management of the Covid19 pandemic, and so was conducted by telephone. The Applicant, because of his physical impairments was ably represented by his wife. The Tribunal thanks all parties for their co-operation in this matter.
Key facts
In May 2005 the Applicant was severely injured in a motor vehicle accident, in which he, as a pedestrian was struck by a car. On 15 September 2008 the Applicant’s compensation claim was settled for the sum of $2,150,000.[1]
[1] Section 37 Tribunal Documents at 21-27.
After disbursements, the Applicant received a total sum of $1,075,000.[2]
[2] Section 37 tribunal Documents at 105.
On 25 February 2019 the Applicant lodged a claim for the DSP. All the evidence supports a finding that, as a result of the severe injuries suffered by the Applicant, he was qualified on the basis of his impairments for the DSP.[3]
[3] Section 37 Tribunal Documents at 30.
However, on 11 April 2019 his claim was rejected because of the Applicant’s being found to have been precluded from receiving the payment due to his compensation payout. This initial decision was reviewed by an Authorised Review Officer (ARO) of the Department and confirmed on 29 April 2019.
The Applicant sought further review in the AAT1 by application made on 27 May 2019 and, as noted above, the ARO’s decision was confirmed by the AAT1 on 10 July 2019. The Applicant applied to this Tribunal for a second-tier review on 2 August 2019.
Preclusion periods
There is an underlying public policy rationale for there being preclusion arrangements under the Social Security Act 1991 (Cth) (the Act).
These date back to 1988 when the Social Security Amendment Act1988 (Cth) introduced the concept that social security payments might be affected in a particular way where individuals were also in receipt of lump sum compensation payments. That Act further provided that:
“… for future personal injury settlements made by agreement or by consent order, 50% of lump sum compensation will be deemed to be in respect of economic loss.”[4]
[4] Minister’s Second Reading Speech, House of Representatives Hansard, 13 April 1988 page 1497.
In analysing the way in which lump sum compensation payments are to be treated, Mansfield J stated[5]:
[18] However, that unfairness did not lead to the outcome which the applicant sought. That is because the tribunal thought that the legislation intended compensation payments to be treated differently to any other source of income. After referring to the Explanatory Memorandum to the Social Security Legislation Amendment (Budget and Other Measures) Bill 1996, Pt II of Sch 15, which deals with the alterations to s 1165 so as to introduce subs (1A) and the concept of the new lump sum preclusion period, the tribunal said that the legislation intends that a compensation recipient exhausts available funds before claiming social security benefits.
[19] In my judgment, the tribunal was in error in interpreting the legislative intent in that way. In the second reading speech referred to, the following is included:
The rationale for the provision is that a person who receives a lump sum compensation payment that contains an amount for economic loss, should use part of the payment to provide for himself or herself for a period before turning to the Australian taxpayer, through the social security system for additional support.
[5] Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211.
In Haidar, the Federal Court noted:
“Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled to both social security benefits and benefits in the nature of income through lump sum payments.”[6]
[6] Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 at [263].
The method for calculating the preclusion period is far from simple. It is set out in various sections of the Act.
Part 3.14 of the Act headed “Compensation Recovery” outlines a scheme whereby under s 1160 if a person is in receipt of certain “compensation affected payments” they are precluded from receiving “affected payments” for a specified period of time (the “preclusion period”).
Section 17(1) provides that DSP payments are “compensation affected payments” and thus brought within the operation of the exclusions related to compensation payments.
Section 1169 sets out the general rules applying to the preclusion period and s 1170 defines (and gives the formula for calculating) the preclusion period:
1160 General effect of Part
(1) This Part operates in certain specified circumstances to do one or more of the following:
(a) reduce a person’s compensation affected payment;
(b) render a person’s compensation affected payment not payable;
(c) require the repayment of some or all of a person’s compensation affected payment;
because of the receipt of compensation by the person or the person’s partner.
(2) This Part applies whether or not there is any connection between the circumstances that give rise to the person’s qualification for the compensation affected payment and the circumstances that give rise to the receipt of compensation by the person or the person’s partner.
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.
(2) In this section:
“lump sum compensation payment” does not include a lump sum payment:
(a) to which section 1164 applies; or
(b) that relates only to arrears of periodic compensation payments.
1170 Lump sum preclusion period
(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).
(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).
(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).
(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 a lump sum
Income cut-out amount
(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.
On this basis, the Respondent has calculated that the relevant start date under s 1170(3), being the date that the loss of earnings or loss of capacity to earn commenced, was 22 May 2005, the date of the motor vehicle accident.
The definitions and formula used to calculate the “compensation part of a lump-sum compensation payment” (the relevant amount) is set out in s 17(3) of the Act:
(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.
Once a commencement date is established, an end date for the preclusion period is derived by application of sections 1170(4) and 1170(5) of the Act, above.
Using this formula, the Respondent has taken the total compensation payment of $2,150,000 and derived 50% of this to be $1,075,000.
Section 17(8) then provides the formula for calculating the divisor, namely the income cut-out amount:
(8) For the purposes of the definition of income cut-out amount in subsection (1), the formula is as follows:
All this being established[7], the following calculations arise:
(a)The income cut-out amount = $759.75
(b)Using this as the divisor into $1,075,000 = 1414 (weeks)
(c)With a starting date of 22 May 2005, that period ends on 26 June 2032.
[7] The definitions of the terms in the formula are set out in section 1064 of the Act.
The Respondent does not dispute these mathematical calculations. The Tribunal accepts them as correct.
The result of this determination is that, in the ordinary course of events, the Applicant would be precluded from receipt of DSP until 26 June 2032.
This information was conveyed to the Applicant by letter dated 30 October 2009. In that correspondence the Applicant was asked to indicate that they understood the implications and effect of the preclusion period on other potential social security entitlements.[8] On 6 November 2009 the Applicant personally signed a letter of acknowledgement to this effect.[9]
[8] Respondent’s Statement of Facts, Issues and Contentions at Attachment [D].
[9] Section 37 Tribunal Documents at 37.
However, the Act provides that all these determinations may be disregarded, in whole or in part by the Respondent if, in the opinion of the Secretary, there are “special circumstances” justifying such a course of action.
Special circumstances
Section 1184K of the Act provides:
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.
(2) If:
(a) a person or a person's partner receives or claims a compensation affected payment; and
(b) the person receives compensation; and
(c) the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person's or the person's partner's receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).
As with so many key concepts in the Act, the term “special circumstances” is not given any precise definition. Without going into extensive detail, it can be said that the courts have identified a number of factors which go to establishing whether or not “special circumstance” exist. They must be:
·Something more than ordinary or usual[10]
·Markedly different from the usual run of cases – not necessarily unique but having a particular quality of unusualness[11]
·Somehow distinguishing from usual cases of an analogous nature[12]
·Attuned to the individual circumstances of each case[13]
·Not so rigidly applied as to risk harsh or unreasonable outcomes[14]
·Involving “facts peculiar to the particular case which set it apart from other cases”[15]
·Supportive of the overall integrity of the social security system and recognising the public interest in ensuring that public moneys are recovered where they can and should be.[16]
[10] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; Jess v Scott and Others (1986) 70 ALR 185.
[11] Re Beadle and Director General of Social Security (1984) 6 ALD 1 at [3].
[12] Dranichnikov v Centrelink [2003] FCAFC 133.
[13] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.
[14] Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
[15] In the Marriage of Philippe (1997) 4 Fam LR 153 per Kay J.
[16] Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569; Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114, Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
Many applicants pleading special circumstances will find themselves in circumstances of financial hardship. However, in Gartside[17] the Tribunal made it clear:
I do not understand the many Federal Court and Tribunal decisions on “special circumstances” to require the Tribunal to find that special circumstances exist simply because the Applicant is in straitened financial circumstances. My understanding of the law is that it is open for the Tribunal to find special circumstances in such a circumstance, but a Tribunal Member is not obliged to do so. In exercising the discretion vested in the Tribunal, a Member is required to consider all of the matters the evidence admitted produces and straitened financial circumstances is one factor, albeit a very important one, but not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:
“The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances. Very often their stories will be quite tragic.”
[17] Gartside and Secretary, Department of Social Services (Social services second review) [2017] AATA 45 at [57].
The Applicant’s circumstances
The Applicant told the Tribunal that, at the time of hearing, all of the roughly $1 million of the lump sum payment had been expended and that he and his wife were living on the Carer Payment and Carer Allowance payments which his wife received. He stated that his wife had had to give up her own employment after the accident to look after him and that his lump sum payment had, in effect, to look after the welfare of both of them.
He asserted that his continuing special needs for care and medical support were such that this was not an adequate income for him to maintain an appropriate standard of living.
In relation to the expenditure of the lump sum payment, the Applicant drew attention to what he claimed were necessary expenses which had diminished the original capital. Among the major expenditure items were:
(a)Paying off his mortgage ($355,954)
(b)The installation of a therapy pool at his home ($48,660)
(c)Eye surgery for himself ($6,400) and his wife ($5,900)
(d)Purchase of a motor vehicle ($32,653)
(e)Rehabilitation services ($14,000)
(f)Blinds and shutters for the bedroom and living area ($5,900)
(g)Accounting and taxation services ($4,820)
(h)Dental work ($3,000)
(i)Mobility and therapeutic aids ($3,375); and
(j)House repairs and maintenance ($8,000).[18]
[18] Applicant’s Statement dated 23 September 2019.
Such items amount to a total in the order of $488,600 or some 45% of the lump sum. This left somewhere in the vicinity of $587,000, which itself had been expended within the 12 year period to 2020.
The Respondent put to the Tribunal some material which challenged the Applicant’s claims. In the first instance, while the Applicant claimed that he received $1,075,000 by way of final settlement[19], the Respondent claims that this figure was higher. The Respondent points to evidence that a sum of $950,000 was invested with Colonial First State, which payment was made after a $355,000 mortgage had been discharged.[20] This would give a figure for the lump sum closer to $1,305,000. In addition there was expenditure of some $73,000 on holiday travel (Bali, Thailand, New Zealand) between October 2012 and July 2018.[21]
[19] Section 37 Tribunal Documents at 105.
[20] Respondent’s Statement of Facts, Issues and Contentions at [38].
[21] Respondent’s Statement of Facts, Issues and Contentions at Attachment E.

Furthermore, at the time of the AAT1 hearing the Applicant retained as a personal asset his principal place of residence which was otherwise unencumbered. The Respondent points to judicial authority on this point.
In Hajar the Tribunal stated:
“On the question of hardship, I find it impossible to ignore the existence of the house which is valued at approximately $175,000 and which is free of encumbrances… It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it…”[22]
[22] Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 at [45].
In Austin the Tribunal referred to Hajar and went on:
“The applicant’s house, in effect, represents his compensation in a different form. In that, he is in a better financial position than many other recipients of social security payments.”[23]
[23] Austin and Secretary, Department of Social Services [2014] AATA 516 at [22].
In Winterbotham the Tribunal considered the issue of whether or not an applicant should be required to sell his home in order to deal with problems of financial hardship. It stated:
“Should there be any difference between on who invests his money in stocks and shares and one who invests in real estate? Neither should expect the taxpayer to support him while he holds onto assets he could well realise and use to support himself. That is not to say that the Tribunal seeks to force the respondent to sell his house; or even recommends that course of action. It is not the Tribunal’s role to do that. At the same time, the Tribunal cannot ignore the view that the selling of the house is one way by which the applicant could resolve his present difficulties. It is an evident course of action, although not by any means the only one.”[24]
[24] Winterbotham and Secretary, Department of Social Security [1990] AATA 808 at [25].
Since the time of the AAT1 hearing the Applicant has indeed taken steps to realise the value in this asset and on 22 November 2019 sold the property at North Strathfield (NSW) for the sum of $1,960,000. He and his wife then relocated to Burleigh Waters in Queensland where they purchased a home for $945.000.[25] In response to a question from the Tribunal the Applicant conceded that there was a current balance in the couple’s account in the order of $700,000 to $800,000.
[25] These figures were given in sworn oral evidence at the Tribunal hearing by the Applicant’s wife acting on his behalf.
As noted, the Applicant’s wife is in receipt of Carer Payment at $703.50 per fortnight and Carer Allowance of $129.80 per fortnight.[26]
[26] Respondent’s Statement of Facts, Issues and Contentions at [46]. The Applicant’s wife stated to the Tribunal that these payments are slightly lesser at $694 and $128 respectively.
The Applicant put it to the Tribunal that although there was a considerable sum held in their accounts as a result of the property transactions, considerable expenses would be needed to make the new home suitable for a person with severe disabilities. It is not unusual for such a situation to arise, nor for applicants to be often in pain and in need of medical and other attention[27], sometimes at considerable cost.
[27] Hammelswang and Secretary, Department of Social Services [2015] AATA 905 at [7].
Discussion
In order to succeed in the application to have the preclusion period reduced, the Applicant must show that there are “special circumstances” requiring that this should be done. Hardship alone is not a “special circumstance.” There must be something which, in line with all the judicial authority cited, sets this application apart and invests it with some unique and special characteristic which distinguishes it, in a meaningful sense, from all other applications reflecting similar circumstances.
There is no prescriptive list of such characteristics and each case is unique in itself. In this instance the Applicant made a number of choices about personal expenditure in the full knowledge that his compensation payment was supposed to sustain him for a period of some 27 years. The lump sum appears to have been expended in about 12 years. Apart from the holiday expenditure which the Respondent implies was extravagant[28], but the Applicant maintains was related to seeking an improvement in his health,[29] there is nothing to suggest that the Applicant was reckless in his expenditure decisions[30].
[28] The question of travel expenditure was considered in William Griffiths and Secretary, Department of Social Security [1992] AATA 123 at [35].
[29] Applicant’s Statement, 23 September 2019 page 6.
[30] Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339 at [35].
However, he was aware that he had to budget carefully to make his compensation payment last for the prescribed length of time. In Sams[31] Deputy President Constance, dealing with a DSP preclusion claim, said:
“Although I do not suggest that Mrs Sams dwindled the money on extravagant purchases, I am satisfied that had she been more careful in managing her finances then Mrs Sams’ present financial hardship could have been prevented.”
[31] Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654 at [40].
The fact that the Applicant is now in a position that his recent property transactions have left him with somewhere in the order of $700-800,000 does distinguish his case from many others in that he has access to a capital sum much greater than most applicants in straitened circumstances. As the Respondent pointed out to the Tribunal, if this sum were to be taken at the lower end ($700,000) and spread over the approximately 312 fortnightly periods between now and 26 June 2032, the Applicant would be able to access a fortnightly payment greater than the current rate of DSP.
Both the Applicant’s history and circumstances from 2008 to date, and his current financial position, fail to establish that there are any special circumstances in his case. Nor do they establish that the application of the standard formula to his individual circumstances would risk inflicting a harsh or unreasonable outcome.
DECISION
The decision under review is affirmed.

I certify that the preceding 47 (forty-seven) paragraphs are a true copy of the reasons for the decision herein of Chris Puplick AM, Senior Member

...........................[sgd]..........................................
Associate
Dated: 20 April 2020

Date of hearing: 14 April 2020

Advocate for the Applicant: Mrs J Wakefield

Solicitors for the Respondent: Ms B Salaji, Services Australia

Date of hearing:	14 April 2020
Advocate for the Applicant:	Mrs J Wakefield
Solicitors for the Respondent:	Ms B Salaji, Services Australia