Woolrich; Secretary, Department of Family and Community Services

[2000] AATA 943

DECISION AND REASONS FOR DECISION [2000] AATA 943

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  N1999/1928

GENERAL ADMINISTRATIVE DIVISION      )                  
           Re      SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES  
  Applicant
           And    MARIE WOOLRICH           
  Respondent

DECISION

Tribunal       Dr JD Campbell       

Date30 October 2000

PlaceSydney

Decision      The Tribunal determines that the decision under review be set aside and in substitution thereof finds that the Respondent was subject to a recovery by the Applicant of an amount of $5,261.80 from her compensation settlement.      

[Sgd]: Dr JD Campbell
  Member
CATCHWORDS

SOCIAL SECURITY –– compensation payment – economic loss component – preclusion period – discretion re compensation settlement - special circumstances

Social Security Act 1991, sections 17, 1165, 1168, 1184

Secretary, Department of Social Security and Caruso (AAT 11305, 11 October 1996)

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

Re Ivovic and Director-General of Social Services (1981) 3 ALN 95

Re Green and Secretary, Department of Social Security (1990) 21 ALD 772

Secretary, Department of Social Security v Banks (1990) 20 ALD 19

Secretary, Department of Social Security v 'Beckett (1990) 21 ALD 79

Re Secretary, Department of Social Security and Cavaleri (1989) 19 ALD 101

Secretary, Department of Social Security v Hulls  (1991) 22 ALD 570

Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152

Re Secretary, Department of Social Security and Beel (1995) 38 ALD 736

Re Caruso and Secretary, Department of Social Security (1996) AAT 11243

Secretary, Department of Social Security v Cuneen (1997) 48 ALD 251

REASONS FOR DECISION

Dr J D Campbell, Member.

1. The Secretary, Department of Family and Community Services ("the Applicant") in this matter seeks a review of the decision of the Social Security Appeals Tribunal ("the SSAT") dated 24 November 1999 which set aside the decision of a Centrelink delegate of the Secretary, Department of Family and Community Services dated 25 March 1999, that Mrs Woolrich ("the Respondent") was subject to recovery by the Applicant of an amount of $5261.80 from her compensation settlement. This decision had been reviewed and affirmed by the authorised review officer on 7 May 1999, prior to being set aside by the SSAT, which in substitution found that the recoverable amount should be recalculated using the figure of $3680 as the economic loss component and to treat the amount of compensation settlement of $17,640 as not having been made.

2. A hearing was held in Newcastle on 10 July 2000, at which the Applicant was represented by Ms Buckley, an advocate from the Administrative Law section of Centrelink. The Respondent was represented by Mr Rodney, a solicitor from the firm of Bilbie Dan. The Tribunal was assisted by an interpreter fluent in the Tagalog language.

3. The following material was placed in evidence before the Tribunal:
   Exhibit No.   Description  Date  
   T1 – T22 pp 1-51 Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
   A1      Two page print-out re Respondent's earnings in March 2000            
   A2      Applicant's statement of facts and contentions  17 March 2000        
   R1      Respondent's statement of facts and contentions        7 July 2000   

Issues:

1. The relevant issues in this matter are:
   1. Whether Mrs Woolrich has "special circumstances" pursuant to section 1184 of the Social Security Act 1991 whereby all or part of her compensation payment is treated as not having been made; and 2. in whether, in the Respondent's case, the application of the 50% rule has produced an unfair or unintended outcome.
   Legislation:

1. The legislation in this matter is the Social Security Act 1991 ("the Act") and in particular sections 17, 1165, 1168 and 1184.
   Background:

2. Mrs Woolrich was receiving a parenting payment as a single parent when she received a lump sum compensation settlement of $25,000 on 19 March 1999. The compensation settlement arose from the Respondent being a passenger when injured as a result of a motor vehicle accident on 28 July 1996. On 25 March 1999 a Centrelink delegate made a decision to recover an amount of $5261.80 from the Respondent's compensation settlement. This decision was reviewed and affirmed by an authorised review officer in the decision dated 7 May 1999. The SSAT set aside the primary decision on 24 November 1999 and sent the matter back to the Chief Executive Officer of Centrelink for reconsideration. The SSAT directed Centrelink to recalculate the amount recoverable from Mrs Woolrich's compensation using the figure of $3,680 as the economic loss component, and to treat the amount of compensation settlement of $17,640 as not having been made (T2).
   Mrs Woolrich's evidence:

3. Mrs Woolrich told the Tribunal that she was born in the Philippines in 1958 and that she married Mr Woolrich in 1994 prior to coming to Australia on 21 September of that year. She stated that she has two children, a son aged four at the time of her leaving the Philippines and who is cared for by her mother, and a daughter aged ten when she accompanied her mother to Australia. Unfortunately Mr Woolrich  died on 21 October 1995, and the Respondent was left to secure funds from her sister and her community to pay for his funeral. Mrs Woolrich further stated that shortly thereafter she received a single mother's pension, with accommodation being provided by the Department of Housing for her and her daughter. Further help was also sought from charitable organisations.

4. The Respondent stated that in early July 1996 she commenced working as a part-time cleaner on every Monday morning. She earned $40 per week, knowing that at the time there was a limit on how much she could earn while continuing to receive income support payments. The Respondent stated that she was involved in a motor vehicle accident on 28 July 1996 and received multiple injuries when travelling as a passenger. Following the accident she visited the doctor on a weekly basis and received physiotherapy for four and a half weeks.

5. The Respondent stated that she recommenced work in Christmas 1998 and worked as a casual in a shop throughout 1999. The Respondent stated that she recommenced full-time work with a Newcastle cleaning company in 2000.

6. Mrs Woolrich described to the Tribunal the manner in which her net amount of compensation of $10,746 was expended. A significant sum of $5,500 was used to pay for a return visit to the Philippines to see her son, upon which she was accompanied by her former common law partner and daughter. This visit lasted one month. A further $1,000 was repaid to her common law partner to reimburse him for his reduction in newstart allowance whilst they were living together. The remainder was expended on photographs ($100), a computer for her daughter ($780), clothing ($466) and savings ($2,900). Mrs Woolrich stated that her common law partner left three months after her receipt of compensation and that during their period of living together each had met 50% of expenses for food, telephone and electricity.

7. In response to questions in cross examination, Mrs Woolrich confirmed that:

• she received continuous income support payments from Centrelink between 27 July 1996 and 22 February 1997;

• while in casual employment at the corner shop she was earning $600 per fortnight;

• she was currently in full-time employment, earning the sums nominated in Exhibit A1;

• she has no relatives in Australia, and that she had to send money back for her brother's funeral ($1,000), which she borrowed from her former partner and which she had to repay;

• her daughter is in year 10;

• she sends $300 to $400 every two months to the Philippines to pay for the care of her son;

• she has a 1984 Colt car; and

• she may need to have a gall bladder operation, and she continues to suffer from rib pain and reflux for which she takes Panamax one tablet three times a day.

Applicant's Submissions:

1. The Applicant contends that the SSAT have misapplied section 17 and 1184 of the Act in this matter. Further it is contended that the SSAT failed to acknowledge the principles and interpretation of section 17 of the Act nominated in a significant and consistent body of case law.

2. The Applicant further contends that upon receipt of the compensation money, the Respondent spent the money in a discretionary fashion: that she has few debts and did not have extraordinary expenses. There is no evidence to suggest that she is experiencing financial hardship during the period commencing with the payment of the compensation money. Further the Applicant contends that upon examination in relation to the Respondent's circumstances, there are none which would enable a finding of special circumstances to be made.
   Respondent's Submissions:

3. The Respondent contends that this matter involves an appeal against the use of a discretionary power and that as such the Applicant must demonstrate that an error exists in exercising the discretion. The Respondent in essence relies on the finding by the SSAT that "the small amount of the award attributable to economic loss is an unusual, exceptional or uncommon circumstance", and further relies upon the findings in (Secretary, Department of Social Security v Beel) (1995) 38 ALD 736 and Re Secretary, Department of Social Security and Caruso (AAT 113051 11 October 1996).

4. The Respondent further contends that the Applicant's financial situation and her ill health should be considered special circumstances at the time she received the compensation money.
   Considerations and findings:

5. In preliminary comments, the Tribunal observes that there is no disagreement between the parties on the facts in this matter and accordingly the Tribunal makes the following findings of fact:

   (a)the Respondent was involved in a motor vehicle accident on 28 July 1996, having commenced part-time cleaning work to the value of $40 a week some three weeks earlier;

   (b)the Respondent received a lump sum compensation payment of $25,000 on 19 March 1999, and that after particular disbursements she received a net figure of $10,746;

   (c)the Respondent did receive income support payments from the Applicant during the period 27 July 1996 to 22 February 1997 and that these payments did amount to $5261.80, which has been recovered by the Applicant from the lump sum compensation.

   (d)the Respondent made particular discretionary expenditures with the net compensation sum, including a visit to the Phillipines with her daughter and her ex-common law partner to see her younger son, and a repayment of a debt of $1,000 to her ex-common law partner;

   (e)the Respondent worked throughout 1999 at a corner shop on a part-time basis earning some $600 per fortnight and in 2000 she commenced work on a full-time basis with a Newcastle cleaning company;

   (f)the amount of economic loss claimed on behalf of the Respondent in the District Court was $3,680 (92 weeks X $40) pursuant to part 12 Rule 4A in the District Court of New South Wales.

   (g)the consent order dated 19 March 1999 awarded the Respondent $25,000, with no detail as to the composition of the award. 

1. The issue in this matter is essentially whether the Tribunal, after assessment of the nominated circumstances, concludes as to whether or not they constitute special circumstances, and if they do, whether or not the Tribunal may wish to disregard some of the compensation as not having been made. In considering these issues, the Tribunal observes section 17(1) of the Act which defines particular payments as "composition affected" payments, and section 17(2) and (3) which relevantly state:

   "17(2)  For the purposes of this Act, compensation means:

(a)       a payment of damages; or

(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d)       any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments) that is:

(e)       made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f)        made either within or outside Australia.

…
17.(3)  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 judgement being entered in respect of the settlement or otherwise, on or after 9 February 1988; or…

1. The Tribunal further observes sections 1165(1A), 1165(7), 1165(8) and 1179:

(a) section 1165(1A) of the Act provides that if a person receives a compensation lump sum after 20 March 1997 they are precluded from receiving a compensation affected payment for the duration of the "new" lump sum preclusion period;

(b)section 1165(7) of the Act states that the preclusion period commences on the day the loss of earnings commenced;

(c)section 1168 provides that the length of the preclusion period is determined according to the following formula;

compensation part of lump sum / income cut-out amount;

(g)section 1179 of the Act provides for the repayment to the Commonwealth of any compensation affected payments paid to a person during a lump sum preclusion period upon the issue of a written notice.

1. In this matter there is no argument between the parties that the Respondent was receiving a compensation affected payment at the time of her injury; that she did receive a lump sum payment of compensation of $25,000 and that in accordance with section 17(3) of the Act the compensation part of the lump sum payment is $12,500 in the normal course of events. The Respondent, relying upon the decision of the SSAT, argues that the compensation part of he lump sum compensation should only amount to $3,680, that being the amount nominated in the Respondent's claim.

2. The Tribunal, in examining this issue, concludes that there is much difficulty with such a provision, and even more difficulty with the concept of calling such a circumstance a special circumstance. The Tribunal acknowledges that the statutory framework is enacted for good and proper reason and concludes that in all circumstances it should be followed. To do otherwise would be an error of law. The consequences that flow from such adhesion to the statutory framework are those nominated in this matter, namely that the compensation part of the lump sum compensation is $12,500, which in turn results in a preclusion period of 30.28 weeks and a repayment to the Commonwealth of $5,261.80 by the Respondent as a result of receiving compensation affected payments of that amount during the preclusion period.

3. It would appear to the Tribunal that an argument based on what may or may not be stated in a statement of claim is without merit. The Tribunal finds that any consent award that results from the initiation of an action is a consent award between the parties and is a reflection of an agreement between the parties which may or may not reflect issues nominated in the statement of claim. Even so, it is in the Tribunals view, a significant departure from the intentions of the statutory process and in particular section 17(3) of the Act that the compensation part of the lump sum compensation is effectively nominated by a statement in an initiating claim.

4. The Tribunal in arriving at its conclusion had its attention drawn to a number of cases which have dealt with this issue, namely:

   (a)in Secretary, Department of Social Security v Banks (1990) 20 ALD 19, Von Dousa J, in discussing an equivalent provision, namely section 152 of the Social Security Act 1947 ("the 1947 Act"), wrote at paragraph 20:

   "The prescribed percentage (50 per cent) of the lump sum payment made in settlement of a claim which by sub-para 152(2)(i) is deemed to be the "compensation part of a lump sum payment by way of compensation" should be viewed as a broad attempt to balance 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. The paragraph seeks to eliminate double dipping in a practical way which operates effectively in a straight forward manner. In the very nature of an arbitrary provision, sub-para (i) could possibly entail a degree of unfairness in a particular case, but the present case is not an example. Here, by the terms of the order, almost all of the lump sum was paid in respect of incapacity for work, actual or potential, yet only 50 per cent of the lump sum is treated as the compensation part of the lump sum for the purposes of calculating the exclusion period."

   (b)in Secretary, Department of Social Security v a'Beckett (1990) 21 ALD 79, Von Dousa J, at paragraph 38, stated:

   "Where a claim for damages or compensation is settled after negotiation between the parties for a global sum it will frequently be impossible to dissect that sum into component parts in any meaningful way. It will frequently be impossible to determine as a matter of hard fact that a particular amount, or even an approximate amount, was included for a particular head of loss. A claimant may have one belief about the merits, or the lack of them, of a particular head of claim put forward on his behalf, whilst the party paying might have quite another view. Where liability is in issue a claimant might accept a modest offer believing (perhaps on facts unknown to the other side) that a particular head of loss will not be proved if the matter proceeds to trial. On the other hand the party making the payment might provisionally allocate a substantial sum to that particular head when calculating an offer, and then markedly discount the calculation to reflect a view that the claimant could fail altogether, or in a negligence action, is partly to blame. These considerations, in my opinion, render an exercise of the kind undertaken by the Tribunal in the present case where primary consideration is given to the beliefs of the claimant and his advisers, an unhelpful one."

(c)in Secretary, Department of Social Security v Hulls (1991) 22 ALD 570, O'Loughlin J was concerned with the findings in Banks (supra) and further indicated that the 50% rule was introduced to prevent any dissection of the lump sum.

(d)such decisions were followed by the Tribunal in relation to section 17(3) of the Act in Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152 where the excision of certain amounts from the compensation lump sum as not being payments in respect of an incapacity for work were declined;

(e)In ReSecretary, Department of Social Security and Beel (1995) 38 ALD 726, and Caruso and Secretary of the Department of Social Security (1996) AAT 11243, the Tribunal did find that the compensation part was 50% of the limp sum compensation payment in accordance with section 17(3) of the Act, but disregarded a quantum of the lump sum compensation payment pursuant to section 1184 of the Act due to special circumstances. The special circumstances found to exist were the detailing of the economic loss component in the consent orders, with a significant difference occurring between the nominated figure and the compensation part of the lump sum compensation payment;

(f)in Secretary, Department of Social Security v Cuneen (1997) 48 ALD 251, the Federal Court concluded that regardless of the identified heads of damage, a lump sum is indivisible for the purposes of part 3.14 of the Act.

1. In further considering this matter, the Tribunal, in reflecting upon situations in which it has been found that special circumstances have been found to exist because the statutory framework produced a compensation part of a lump sum payment that was perceived to be at such significant variance with what was detailed as an economic loss in consent orders, concludes that such cases are not consistent with the statutory intent of the legislation. Further, in claiming that such situations are unfair, advocates for such a position are in the Tribunal's view placing a significant emphasis on the proper construction of a consent order, while at the same time jeopardising the integrity of a statutory process which balances both individual social need and a community's responsibility to ensure equity and probity of resource distribution to meet those needs.

2. Finally the Tribunal notes that in this matter the question of economic loss component was raised in the Respondent's statement of claim and that the consent order was silent on any detail as to the elements of the lump sum payment. As such this distinguishes this matter from those cases in which particulars were detailed in the consent order.

3. In turning to a further examination of the statutory framework, the Tribunal notes section 1184 of the Act which provides:

   "1184.(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."

1. The phrase "special circumstances" has been subject to much judicial examination and expression, commencing with Toohey J in Re Beadle and Director General of Social Security (1984) 6 ALD 1 where he stated:

   "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 on 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."

1. In relation to compensation recovery pursuant to section 115 of the 1947 Act (the equivalent of section 1184 of the 1991 Act) the Tribunal in the case of Re Ivovic and Director-General of Social Services 3 ALN N95 considered that the "plain intention of section 115 of the Act" is that the person is subject to the liability created by section 15(4) "unless the Tribunal is satisfied that special circumstances exist by reason of which the person should be released in whole or in part from that liability."

2. In Re Green and Secretary, Department of Social Security (1990) 21 ALD 772, the Tribunal nominated a framework against which claim for special circumstances could be considered:

   "The use of the word "special" is "intended to allow the decision maker the fullest opportunity to consider the particular circumstances of each case";

• "hardship is a relevant consideration" but regard must be had to the way in which the hardship arose;

• there must exist "factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes;

• the decision maker must have regard to whether, by exercising the discretion in  particular case he/she will be achieving or frustrating the ends or objects which are conformable with the scope and purpose of the Social Security Act; and

• the decision maker must be prepared to respond to special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate."

1. In considering the nominated circumstances of this matter the Tribunal, while acknowledging the difficult circumstances that the Respondent experienced following the death of her husband and the injury arising from the motor vehicle accident, must turn its attention to circumstances existing at the time of the consent agreement and any circumstances which have occurred thereafter as a consequence of that injury. In this regard the Tribunal has had it's attention drawn to the unfairness resulting from adherence to the statutory framework as opposed to accepting the Respondent's claim for economic loss, the financial circumstances and health impairments.

2. In assessing each of these nominated circumstances the Tribunal is of a view that:

(a)in relation to the unfairness issue, the Tribunal is of a view that simply because one could maximise one's outcome by electing to use a nominated economic loss component as the numerator, it is by definition unfair. In the Tribunal's opinion, unfairness, even if it were found to exist in this matter, must be evaluated against both the process that the statutory framework nominates and the consequences of the use of the process, if it is to be considered a special circumstance. In this matter the consequences for the Respondent are a higher amount of money to be repaid with no impairment of the integrity of the statutory process under which the decision was made. The alternative would be a lesser amount of repayment by the Respondent and an impairment of the statutory process. In considering the consequence to the Respondent there is a variance in repayment of an amount of money of some five thousand dollars and this must be assessed against the Respondent's circumstances in order to conclude whether or not special circumstances are found to exist.

1. The Tribunal, in evaluating the circumstances of the Respondent, observes that she was in employment during 1999 earning $600 per fortnight and that particular discretionary expenditures were made during 1999. Further the Tribunal notes that the Respondent is in full-time employment in 2000. In assessing these circumstances the Tribunal does conclude that the Respondent is not in financial hardship. Similarly, while acknowledging the Respondent's medical conditions, it is evident to the Tribunal that these conditions have not prevented the Respondent from engaging in employment or undertaking overseas travel.

2. As a result of these considerations, the Tribunal finds that the Respondent's circumstances are not unusual, uncommon or exceptional and as such do not constitute special circumstances. In so finding the Tribunal has examined factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes and found them to be of lesser consequence, became the basis on which they were established is not necessarily a sound platform (statement of claim). Further the Tribunal weighed the nominated circumstances against the scope and purpose of the Act and concluded that enforcement of the statutory framework in this matter would not be unfair, unreasonable or inappropriate.
   Determination:

3. The Tribunal determines that the decision under review be set aside and in substitution thereof finds that the Respondent was subject to a recovery by the Applicant of an amount of $5,261.80 from her compensation settlement.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for the decision herein of Dr JD Campbell

Signed:         .....................................................................................
  Associate

Date/s of Hearing  10 July 2000
Date of Decision  30 October 2000
Advocate for the Applicant       Ms Buckley
Solicitor for the Respondent    Mr Rodney