Wallis and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2011] AATA 220

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 220

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/5227

GENERAL ADMINISTRATIVE DIVISION		)
Re		MARK WALLIS

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Deputy President D G Jarvis

Date1 April 2011

PlaceAdelaide

Decision The Tribunal affirms the decision under review.

D G Jarvis
  ...[Signed]…
     Deputy President

CATCHWORDS

SOCIAL SECURITY - Compensation receipt - calculation of preclusion period - two lump sum payments - held that redemption of future liabilities constituted payment in relation to same event, notwithstanding discharge referring to other events - imprudent expenditure of compensation received - decision under review affirmed.

Social Security Act 1991 (Cth), ss 1171(1) and 1184K(1)

Workers Rehabilitation and Compensation Act 1986 (SA), s 42

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Riddell v Secretary, Department of Social Security (1993) 42 FCR 443

Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1

Secretary, Department of Social Security v Smith (1991) 30 FCR 56

REASONS FOR DECISION

1 April 2011   Deputy President D G Jarvis

1.      The applicant, Mark Wallis, worked for many years as a shearer.  He was injured at work on 4 August 2003, when his back “went”.  He tried to return to work but was not able to do so.  He then received workers’ compensation. In October 2007 he received the sum of $14,376 as compensation for permanent disability for his back injury, and in November 2009 he received a payment of $100,000 in redemption of future periodic compensation payments and medical and other expenses.

2.      In May 2010, Mr Wallis claimed Newstart allowance (NSA) and Disability Support Pension (DSP).  A Centrelink officer then calculated a compensation preclusion period of 76 weeks, commencing on 30 October 2010 and ending on 14 April 2011.  This calculation was made on the basis that the two compensation payments Mr Wallis had received should be treated as one lump sum totalling $114,376.  A Centrelink officer then rejected Mr Wallis’ claims for NSA and DSP on the grounds that these benefits were not payable during the preclusion period.

3.      Mr Wallis applied for review of this decision, but it was affirmed by an Authorised Review Officer and subsequently by the Social Security Appeals Tribunal (SSAT).  Mr Wallis has applied to this tribunal for review of the decision of the SSAT.

Issues before the Tribunal

4.      The issues before the tribunal are:

(a)whether the two payments of compensation that Mr Wallis received should have been treated as one lump sum for the purpose of calculating the preclusion period; and

(b)whether there are special circumstances which make it appropriate to treat the whole or part of the payments as not having been made, thereby reducing the preclusion period.

Background

5.      The following facts are not in contention, and are based upon the evidence given by Mr Wallis and on documentary evidence included in the section 37 documents (exhibit R1).

6.      Mr Wallis is 52 years of age.  He lives in Millicent in the south-east of South Australia.  He owns his house and estimates that it is worth $145,000.

7.      In July 2009, his son came to live with him.  The son had previously lived with his mother in Adelaide.  The mother makes no contribution towards the son’s living expenses, notwithstanding Mr Wallis’ attempts to obtain assistance through the Child Support Agency.  When his son first came to live with him, Mr Wallis purchased a number of items for him, including clothing, a bed, a television and a computer.

8.      Mr Wallis had engaged a lawyer to represent him in connection with his claim for workers’ compensation.  At or about the time of the agreement to redeem his entitlement to compensation he was advised that there would be a preclusion period during which he would not be entitled to social security benefits.  He said he also thought that if he had money in the bank, he would not be entitled to social security benefits.

9.      Mr Wallis has spent the lump sum payments of compensation that he received.  He spent approximately $22,000 purchasing a Holden station sedan, approximately $30,000 on improvements to his house in the form of a new shed, rainwater tanks and general maintenance, up to $10,000 in paying off debts and the mortgage over his house, and (conservatively) $20,000 on gambling.  He also smokes marijuana, which he finds helps to relieve his back pain, and has borrowed money to pay for this.

10.     In cross-examination, Mr Wallis admitted that he had spent his compensation payment recklessly and inappropriately.  He said that he did not mean to spend it so quickly.  He does not wish to sell his car.  He said he needs the car to drive his son to country football matches, and had always wanted a car of the kind that he purchased.

11.     Prior to the hearing, Mr Wallis produced a list of his weekly expenses and amounts that he owes.  These include a bank overdraft to $2,000, an amount of $1,200 owing to his aunty, and an amount of $2,623 (which had now been increased by the cost of legal proceedings) owing to a private school which his son attended when he first came to Millicent.

12.     He and his son have been living off the youth allowance which his son receives.  This is only $206 per fortnight. He has tried to do some work since the accident in 2003, but he has been unable to resume work since his accident due to his back condition.  He said he and his son cannot manage on their present level of income.

13.     Mr Wallis thought it was incorrect that the preclusion period had been calculated by including the compensation payment of $14,376 that he had received in 2007.

Legislative Scheme

14. Part 3.14 of the Social Security Act 1991 (Cth) (the Act) provides for the effect of compensation recovery on certain social security benefits. Section 1160(1) of the Act provides for the general effect of that Part of the Act. It provides as follows:

“1160(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.”

15.     Section 1169(1) of the Act provides in effect that a compensation affected payment is not payable during a lump sum preclusion period.  It provides as follows:

“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.”

16.     Section 17(2) of the Act defines “compensation”.  This includes a payment of damages “that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”.

17.     Section 17(1) of the Act defines the expression “compensation affected payment”, and a disability support pension, being the benefit which Mr Wallis is likely to apply for at the end of the preclusion period, is included in that definition.

18.     Subsection 1170(3) provides relevantly that the lump sum preclusion period is the period that begins on the day on which the loss of earnings or loss of earning capacity began, and ends at the end of the number of weeks worked out pursuant to the statutory formula referred to in subsections 1170(4) and (5).  That formula refers to the “compensation part of lump sum”.

19.     Section 1171 of the Act provides for two or more lump sum payments of compensation in relation to the same event to be combined in order to calculate the period during which a person is precluded from receiving social security payments.  It provides as follows:

“1171   Deemed lump sum payment arising from separate payments

(1)If:

(a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and

(b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;

the following paragraphs have effect for the purposes of this Act and the Administration Act:

(c)the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;

(d)the single payment is taken to have been received by the person:

(i)on the day on which he or she received the last of the multiple payments; or

(ii)if the multiple payments were all received on the same day, on that day.

(2)A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.”

20.     Section 17(3) of the Act provides an artificial statutory formula for determining the “compensation part of a lump sum compensation payment”.  It provides relevantly 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 … .”

21.     The above provisions must, however, be read subject to section 1184K of the Act.  That section authorises the Secretary (and this tribunal, standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment in certain circumstances.  Subsection 1184K(1) provides as follows:

“1184K(1)For the purposes of this Part, the Secretary may treat the whole or part of the 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.”

Consideration

Should the two instalments of compensation have been treated as one lump sum payment?

22. Mr Wallis entered into an agreement with the Workcover Corporation of South Australia on 29 October 2009 for the redemption of the Corporation’s liability for weekly payments and medical expenses pursuant to s 42 of the Workers Rehabilitation and Compensation Act 1986 (SA). On the face of it, this agreement might suggest that the second lump sum payment of $100,000 entailed a payment to Mr Wallis in relation to more than one event. That is because recital 1 of the agreement refers to the worker having suffered a number of separate disabilities on seven different dates between 1988 and 4 August 2003 (when he sustained the back injury referred to in paragraph 1 above). Recital 1 also lists six different employers for whom Mr Wallis was working at the time he suffered the various disabilities (see exhibit R1, T14, page 85). Further, an order of the South Australia Workers Compensation Tribunal dated 22 October 2009 (which curiously predates the redemption agreement) refers to the worker having sustained disabilities on seven dates between December 1988 and 4 August 2003. It also notes in paragraph 2 on page 2 that the orders are part of a wider agreement between the parties for the redemption of future payments of income maintenance and medical expenses, and that the additional clauses are intended to constitute “full and final satisfaction of all the worker’s entitlements to any species of compensation under the Act for any compensable disability arising from employment with any registered employer to date” (emphasis added; exhibit R1, T14, page 84).

23. While clause 2 of the redemption agreement refers to the corporation having undischarged liabilities to the worker to make weekly payments of income maintenance and pay compensation for medical and other expenses, it does not identify the basis of those liabilities; in particular, it does not say that the liabilities arise from any of the disabilities caused by any of the events that predated the back injury sustained on 4 August 2003. More relevantly (having regard to the terms of s 1171(1)(a) of the Act), the redemption agreement does not provide that any payment will be made to the worker in respect of liabilities arising from disabilities caused by any of such earlier events.

24. However, the payments made to Mr Wallis, of $14,736 in October 2007 and $100,000 in November 2009, are particularised in a schedule of compensation payments made by Employers Mutual Limited (see exhibit R1, T14, page 82). Each payment refers to the date of his injury on 4 August 2003, and refers to the name of his employer as at that date. Further, one of the components of the second instalment of $100,000, namely a figure of $9,500, is expressed to be “Redemption Income Component”. Those matters indicate that the two lump sum payments of $14,736 and $100,000 were received “in relation to the same event”, and that one of the payments was made “partly in respect of lost earning capacity” within the meaning of s 1171(1) of the Act. On that basis, Mr Wallis was correctly taken to have received one lump sum compensation payment within the meaning of s 1171(1)(c) of the Act.

Are the applicant’s circumstances special?

25.     It remains necessary to consider whether special circumstances exist that would make it appropriate for me to treat the whole or part of the payment as not having been made.

26.     The concept of what constitutes “special circumstances” has been discussed in many cases in the Federal Court and in this tribunal.  In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the tribunal was dealing with an application under a different section of the Act which also, however, involved a consideration of whether special circumstances existed. Toohey J said (at page 3):

“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition.  The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional.  Whether circumstances answer any of these descriptions must depend upon the context in which they occur.  For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases.  This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”

27.     In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court’s decision in Beadle, observed at 545 that special circumstances:

“… would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case ... It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”

28.     The flexibility of the concept of special circumstances was referred to in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443, where a Full Court of the Federal Court (Neaves, Burchett and O’Loughlin JJ) said, at page 450:

“Each particular case must be considered on its merits.  It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.”

29.     In a similar vein Heerey J, in Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1, said at [17]:

“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances … Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances.”  (References omitted).

30. However, it is also necessary to bear in mind the purpose of Part 3.14 of the Act, which is to avoid persons who have received a compensation payment from “double dipping” by also receiving social security payments. In Secretary, Department of Social Security v Smith (1991) 30 FCR 56 at 61, von Doussa J referred to the purpose of the predecessor of s 1184K of the Act, and, after pointing out that the 50% rule operated in an arbitrary way, said that the effect of this rule and the provision for special circumstances to be taken into account were “intended to operate together as a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.” These considerations make it appropriate to consider the manner in which persons who have received a lump sum compensation payment have expended the amount received.

31.     I have referred above to how Mr Wallis expended the compensation payment of $100,000 that he received in November 2009.  While this amount included legal costs, and some of his expenditure was responsible, such as paying off debts and assisting to provide for his son, he also expended substantial additional amounts most imprudently.  He did this notwithstanding that he had received appropriate advice prior to agreeing to accept the lump sump redemption of his entitlement to compensation.  The hardship that he is now experiencing is the result of reckless spending on his part, including substantial expenditure on gambling.  As a result, he spent the whole of his lump sum compensation payment within a relatively short period of time.

32.     In addition, Mr Wallis has some assets which could be used to assist him in his present financial straits.  There is some evidence before me as to the value of the motor car that he purchased. He would be able to sell his car and purchase a less expensive and more economical car.  In addition, his house is freehold, and he has made no enquiries from his bank about raising money on the security of a mortgage over his house.

33.     Having regard to the above considerations, I do not think that special circumstances exist. In any event, I do not think it appropriate in the circumstances of this case to exercise the discretion conferred by s 1184K to treat any part of the compensation payment as not having been made. 

decision

34.     The decision under review is affirmed.

I certify that the 34 preceding paragraphs are a true copy
of the reasons for the decision herein
of Deputy President D G Jarvis

N Misiajlo
.... [Signed] ....
Associate

Date/s of Hearing  18 February 2011 
Date of Decision  1 April 2011
Applicant  Self-represented

Advocate for the Respondent   Mr G Camilos
Solicitor for the Respondent     Centrelink Advocacy Branch