XYMV and Secretary, Department of Social Services (Social services second review) - [2022] AATA 4350

XYMV and Secretary, Department of Social Services (Social services second review) [2022] AATA 4350 (6 December 2022)
Division:GENERAL DIVISION
File Number(s): 2021/10017
Re:XYMV
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

Decision
Tribunal:Senior Member Dr Linda Kirk
Date:6 December 2022
Place:Sydney

The Reviewable Decision is affirmed.
..............................[SGD]..........................................
Senior Member Dr Linda Kirk
Catchwords
SOCIAL SECURITY – austudy – newstart – whether compensation preclusion period applies – whether compensation charge has been correctly raised and recovered – Applicant received lump sum compensation – whether special circumstances exist to treat all or part of the payment as not being made – debt recovered from insurance company – should debt be written off or waived – decision affirmed.
Legislation
Social Security Act 1991 (Cth)
Cases
Black and the Secretary, Department of Social Security [1994] AATA 291
Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Davis and Secretary, Department of Family and Community Services [1999] AATA 84
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114
Gartside and Secretary, Department of Social Services [2017] AATA 45
Green and Secretary, Department of Social Security (1990) 21 ALD 772
Groth v Secretary, Department of Social Security [1995] 40 ALD 541
Lintern v Secretary, Department of Social Security [1993] AATA 389
Re Beadle and Director-General of Social Security [1984] AATA 176
Re Colaiacolo and Secretary, Department of Social Security [1985] AATA 91
Re Hajar and Re Secretary, Department of Social Security (1988) 16 ALD 716
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Riddell v Secretary, Department of Social Security (1993) 42 FCR 443
Secretary, Department of Employment and Workplace Relations v Homewood [2006] FCA 779
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67; (2002) 116 FCR 348
Secretary, Department of Social Security v Banks (1990) 20 ALD 19
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570
Secretary, Department of Social Security v Smith [1991] FCA 280
Viscuso and Secretary, Department of Social Services and (Social Services second review) [2021] AATA 3811
Ward and Secretary, Department of Social Services (Social services second review) [2022] AATA 57
Secondary Materials
Commonwealth, Parliamentary Debates, Senate, 21 June 1995, 1531 (Peter Cook, Minister for Industry, Science and Technology)
REASONS FOR DECISION
Senior Member Dr Linda Kirk
6 December 2022
INTRODUCTION

XYMV (‘the Applicant’) seeks a review of a decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (‘AAT1’) of 20 July 2021, which affirmed a decision of Services Australia (formerly the Department of Human Services) (‘the Agency’) to recover a compensation charge of $35,691.94 (‘the compensation charge’), due to a compensation preclusion period from 3 February 2017 to 30 April 2020 (‘the preclusion period’).
On 3 February 2017, the Applicant sustained injuries in a motorbike accident.[1]
[1] T4, 115.
On 22 February 2017, the Applicant began to receive austudy payments.[2] On 14 July 2017, the Applicant’s austudy was cancelled as he was not studying full time.[3]
[2] T11, 199.
[3] T14, 260.
On 20 November 2017, the Applicant began to receive newstart allowance which was paid to him until 14 July 2018.[4] On 6 September 2018, the Applicant again began to receive austudy payments.
[4] T14, 285.
On 1 March 2021, the Applicant signed an agreement (‘the settlement agreement’) which settled by consent his compensation claim in relation to the motorbike accident. It was agreed that the settlement amount be a lump sum compensation payment of $350,000 (‘the compensation settlement’).[5]
[5] T4, 117.
On 2 March 2021, NRMA Insurance (‘NRMA’) lodged a Compensation Advice of Lump Sum Payments form advising the Agency that the Applicant was to receive the compensation settlement. The form indicated that the Applicant had not been receiving periodic payments in respect of the claim, and there was an economic loss component which commenced at the date of injury on 3 February 2017.[6]
[6] T4, 114-116.
On 9 March 2021, the Agency sent the Applicant a letter under s 1184 of the Social Security Act 1991 (Cth) (‘the Act’) notifying that it had applied the preclusion period from 3 February 2017 to 30 April 2020, and it had asked NRMA to repay to the Agency the compensation charge.[7]
[7] T5,120-121.
On 9 March 2021, the Agency also sent letters to NRMA and the Applicant’s legal representative under s 1184 of the Act, informing them that the Applicant had a preclusion period, and that the Agency had requested NRMA repay $35,691.94.[8]
[8] Ibid.
On 16 March 2021, the Applicant contacted the Agency disputing the compensation charge, on the grounds that he was in receipt of austudy during the preclusion period which, in his view, ‘is not an income replacement payment.’[9] A request for review of the compensation charge was initiated.[10]
[9] T10, 186.
[10] T10, 187.
On 22 March 2021, the Agency sent a letter to the Applicant affirming the decision to recover the compensation charge from the compensation settlement.[11]
[11] T10, 188.
On 31 March 2021 the Applicant sought review of the decision by an Authorised Review Officer (‘ARO’).[12]
[12] T10, 189.
On 12 May 2021, an ARO affirmed the compensation preclusion period as well as the recovery of the compensation charge (‘the Reviewable Decision’).[13]
[13] T8, 132-133.
On 31 May 2021, the Applicant lodged an application for review of the Reviewable Decision to the Social Security and Child Support Division of the Administrative Appeals Tribunal (‘AAT1’).[14]
[14] T9, 138-143.
On 20 July 2021, AAT1 affirmed the Reviewable Decision.[15]
[15] T2, 4-11.
On 20 December 2021, the Applicant applied to the General Division of the Administrative Appeals Tribunal (‘the Tribunal’) for a second-tier review of the Reviewable Decision.[16]
[16] T1, 1.
The matter was heard at a hearing of the Tribunal on 1 July 2022. The Applicant appeared at the hearing in person and was self-represented.
LEGISLATIVE FRAMEWORK
Part 3.14 of the Act, headed ‘Compensation Recovery’, contains provisions which preclude a person from receiving ‘compensation affected payments’ for a specified period of time if the person is in receipt of a lump sum compensation payment. The Act provides for recovery of social security payments paid to such a person.
Sections 1160 set out the manner in which the Part operates on ‘compensation affected payments’:
1160General 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.
Subsection 1169(1) of the Act provides that if a person receives a “compensation affected payment” and also receives a lump sum compensation payment, then the compensation affected payment is not payable to the person during the ‘lump sum preclusion period’.
1169Compensation 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.
The ‘lump sum preclusion period’ is determined in accordance with s 1170 of the Act:
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
(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.
A ‘compensation affected payment’ includes a social security benefit: s 17(1) of the Act, which in turn includes austudy and jobseeker payment, and formerly newstart allowance.[17]
[17] Section 23 of the Act.
‘Compensation’ is defined, relevantly, in s 17(2) of the Act to mean:
(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 and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
Paragraph 17(3)(a) of the Act relevantly defines the ‘compensation part of a lump sum compensation payment’ is:
(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.
Recovery of compensation charge
Section 1178 provides for the recovery of a ‘compensation affected payment’ from a recipient:
Subdivision B—Recovery from recipient of compensation affected payment
1178 Repayment of amount where both lump sum and payments of compensation affected payment have been received
(1) If:
(a) a person receives a lump sum compensation payment; and
(b) the person receives payments of a compensation affected payment in relation to a day or days in the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.
(2) The amount to be specified in the notice is the recoverable amount under section 1179.
Section 1179 provides that the s 1178 recoverable amount is the lesser of the compensation part of the lump sum compensation payment or the sum of the payments of the compensation affected payment made to the person in relation to a day or days in the lump sum preclusion period.
1179 The section 1178 recoverable amount
The recoverable amount under this section is equal to the smaller of the following amounts:
(a) the compensation part of the lump sum compensation payment;
(b) the sum of the payments of the compensation affected payment made to the person in relation to a day or days in the lump sum preclusion period.
Section 1183 provides that a potential compensation payer or insurer must notify the Respondent in writing within a certain timeframe when they become liable to pay compensation to a person.
1183Potential compensation payer or insurer must notify Secretary of liability
(1) If a person (the potential compensation payer):
(a) is given a notice under subsection 1182(1) in relation to a person; and
(b) whether before or after receiving the notice, the potential compensation payer becomes liable to pay compensation to the person;
the potential compensation payer must give written notice to the Secretary of the liability within 7 days after:
(c) becoming liable; or
(d) receiving the notice;
whichever happens later.
Penalty: Imprisonment for 12 months.
(2) If an insurer:
(a) is given a notice under subsection 1182(2) in relation to a claim by a person; and
(b) whether before or after receiving the notice, the insurer becomes liable to indemnify the potential compensation payer, either wholly or partly, in relation to the claim;
the insurer must give written notice to the Secretary of the liability within 7 days after:
(c) becoming liable; or
(d) receiving the notice;
whichever happens later.
Penalty: Imprisonment for 12 months.
(3) Strict liability applies to:
(a) an element of an offence against subsection (1) that a notice is a notice under subsection 1182(1); and
(b) an element of an offence against subsection (2) that a notice is a notice under subsection 1182(2).
Section 1184 of the Act provides that the Respondent can recover such amounts from an insurer who is liable to pay compensation by issuing them a notice with the amount specified.
1184Secretary may send recovery notice to compensation payer or insurer
(1) If:
(a) a person (the compensation payer):
(i) is liable to pay compensation to a person (a claimant); or
(ii) where the compensation payer is an authority of a State or Territory, has determined that a payment by way of compensation is to be made to a claimant; and
(b) the claimant has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the compensation payer that the Secretary proposes to recover from the compensation payer the amount specified in the notice.
(2) If:
(a) an insurer is liable, under a contract of insurance, to indemnify a compensation payer against any liability arising from a person’s claim for compensation; and
(b) the person has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the insurer that the Secretary proposes to recover from the insurer the amount specified in the notice.
(3) If a compensation payer or insurer is given notice under subsection (1) or (2), as the case may be, the compensation payer or insurer is liable to pay to the Commonwealth the amount specified in the notice.
(4) The amount to be specified in the notice is the recoverable amount under section 1184A.
(5) A notice under this section must contain a statement of the effect of section 1184D so far as it relates to such a notice.
(6) This section applies to an amount payable by way of compensation in spite of any law of a State or Territory (however expressed) under which the compensation is inalienable.
Special circumstances
The Respondent may, at its discretion, treat whole or part of the ‘lump sum compensation payment’ as having not been made or not liable to be made if the Respondent thinks it is appropriate to do so in the ‘special circumstances’ of the case:
1184K Secretary may disregard some payments
(3)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.
Debt write-off
Section 1235 of Part 5.4 of the Act states:
Part 5.4—Non‑recovery of debts
1235 Meaning of debt
In this Part, debt means:
(a) a debt recoverable by the Commonwealth under Part 5.2; or
(b) a debt under the 1947 Act; or
(c) a debt due to the Commonwealth under a scheduled international social security agreement; or
(d) a debt under the Social Security (Fares Allowance) Rules 1998.
Note: Overpayments under section 1228 are not debts for the purposes of Part 5.2.
Subsection 1236(1A) of the Act allows for the Respondent to write off a debt in specified situations:
1236 Secretary may write off debt
(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c) the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d) it is not cost effective for the Commonwealth to take action to recover the debt.
Waiver for administrative error
Section 1237A of the Act relevantly states:
1237A Waiver of debt arising from error
Administrative error
1)Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
(1A) Subsection (1) only applies if:
(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or
(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later.
Waiver in special circumstances
Section 1237AAD of the Act relevantly states:
1237AADWaiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
Note 1:Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.
Note 2:This section has effect subject to section 1237AAE in relation to an assurance of support debt.
ISSUES FOR DETERMINATION

The issues for determination are:
a)Whether the Applicant received a lump sum compensation payment;
b)Whether a compensation lump sum preclusion period applies;
c)Whether the compensation charge has been correctly raised and recovered under ss 1178 and 1179 of the Act;
d)Whether there are special circumstances to treat all or part of the lump sum compensation payment as not having been made in accordance with s 1184K of the Act; and
e)Whether all of part of the compensation charge may be written off or waived.
CONSIDERATION AND REASONS
a) Did the Applicant receive lump sum compensation payment?
Whether the Applicant received a ‘lump sum compensation payment’ depends on whether the compensation settlement included an amount for lost earnings or lost capacity to earn, such that it meets the definition of ‘compensation’ in s 17(2) of the Act. If the Applicant received a lump sum compensation payment, the ‘compensation affected payment’ (in this case, austudy and newstart allowance) is not payable to the Applicant during the lump sum preclusion period.
In the Compensation Advice of Lump Sum Payments form completed by NRMA, the insurer confirmed that the lump sum settlement amount included a component for economic loss.[18]
[18] T4, 115 at Question 17.
As the lump sum compensation payment paid to the Applicant was partly in respect of lost earnings or lost capacity to earn, this payment meets the definition of ‘compensation’ in s 17(2) of the Act. It follows that as the Applicant both received a lump sum compensation payment, and compensation affected payments, s 1169(1) of the Act provides that a compensation preclusion period is required to be calculated.
b) What is the compensation lump sum preclusion period?
Given there were no periodic compensation payments, the ‘lump sum preclusion period’ begins on the day on which the loss of capacity to earn begins, and ends at the end of the number of weeks worked out in accordance with the formula in s 1170(4):
Compensation part of lump sum

Income cut out amount
Paragraph 17(3)(a) of the Act provides that when a claim is settled by consent judgment, 50% of the lump sum is deemed to be the ‘compensation part of a lump sum’. The 50% rule was designed to avoid manipulation of the social security system by obscuring the economic loss component of the payout. The Commonwealth Parliament therefore deemed 50% to be in respect of economic loss: Secretary, Department of Social Security v Banks.[19]
[19] (1990) 20 ALD 19 at 24 per von Doussa J.
In the Applicant’s circumstances, the ‘compensation part of the lump sum’ is $350,000 divided by 50% totalling $175,000. This amount is then divided by the ‘income cut out amount’, as calculated in accordance with s 17(8) of the Act. At the date the compensation settlement was received by the Applicant, this divisor amount was $1,033.30.[20] According to this calculation, the ‘lump sum preclusion period’ is 169 weeks from 3 February 2017 until 30 April 2020.
[20] The components used to calculate the income cut out amount are subject to regular changes due to indexation. T13, 211 shows the Agency calculations of the income cut amount at a point in time.
Accordingly, s 1169 of the Act applies so that the Applicant’s austudy and newstart allowance (being ‘compensation affected payments’) were not payable between the period 3 February 2017 and 30 April 2020 (the ‘lump sum preclusion period’).
c) Was the compensation charge correctly raised and recovered under ss 1178 and 1179 of the Act?
The evidence before the Tribunal is that the Applicant was in receipt of social security benefits between 22 February 2017 to 30 April 2020 (the ‘lump sum preclusion period’) totalling $35,691.94. The Tribunal is satisfied that the compensation charge of $35,691.94 was correctly raised from the Applicant’s lump sum payment in accordance with s 1178 of the Act.[21]
[21] T11, 201-202.
NRMA notified the Agency of the Applicant’s lump sum compensation payment on 2 March 2021, leading to the Agency determining that the Applicant had an austudy and newstart allowance compensation charge of $35,691.94 during 28 February 2017 to 30 April 2020.[22] On 9 March 2021, the Respondent gave written notice to NRMA to recover $35,691.94 from the Applicant’s compensation amount under s 1184 of the Act. The Tribunal is satisfied that the compensation charge of $35,691.94 was correctly recovered from the Applicant’s lump sum payment in accordance with s 1184 of the Act.[23]
d) Are there ‘special circumstances’ to treat all or part of the lump sum compensation payment as not having been made in accordance with s 1184K of the Act?
[22] T4, 114-115.
[23] T11, 201-202.
Under section 1184K of the Act, the Tribunal may disregard all or part of the compensation payment and thereby shorten the length of the preclusion period, if the Tribunal considers that it is appropriate to do so in the ‘special circumstances’ of the case.
As Doussa J observed in Secretary, Department of Social Security v Smith,[24] the imposition of a preclusion period, as accompanied by the discretion in s 1184K of the Act is:
… intended to operate together as a fair balance of the interests of the recipient of the [compensation] 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.
[24] [1991] FCA 280 at [17].
If the Tribunal finds that ‘special circumstances’ exist for the purpose of s 1184K of the Act, French J (as His Honour then was) said in Secretary, Department of Employment and Workplace Relations v Homewood[25] that the Tribunal is expected to:
1.Identify the circumstances of the case which it found to be ‘special’ and the reasons for which it arrived at that finding.
2.Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.
3.Explain why it selected the particular quantum (i.e. the whole or part) of the compensation payment as not having been made.
[25] [2006] FCA 779 at [34].
The meaning of ‘special circumstances’
The phrase ‘special circumstances’ is not defined in the Act, however, it has been considered on a number of occasions by this Tribunal as well as the Federal Court of Australia.
In Secretary, Department of Social Security v Hales, [26] French J (as His Honour then was) stated:
The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. … It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words... It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
[26] (1998) 82 FCR 154 at 162.
The Full Court of the Federal Court in Riddell v Secretary, Department of Social Security[27] explained:
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.
[27] (1993) 42 FCR 443 at 450.
The Tribunal considered the term ‘special circumstances’ in Re Beadle and Director-General of Social Security (‘Beadle’).[28] It 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 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.
[28] [1984] AATA 176 at [12].
Beadle was referred to by Kiefel J (as Her Honour then was) in Groth v Secretary, Department of Social Security (‘Groth’) in the following terms:
The phrase “special circumstances”, it has been said, although imprecise is sufficiently understood not to require judicial gloss …. And for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case.[29]
[29] Groth v Secretary, Department of Social Security [1995] 40 ALD 541 at [545].
These authorities recognise that the term is ‘by its very nature incapable of precise or exhaustive definition’,[30] but it requires something to distinguish it from other cases in a way ‘to take it out of the usual or ordinary case’.[31] Furthermore, ‘each particular case must be considered in its merits.’[32] This may be to such an extent that ‘the particular facts of a case might make them – or the amount of them – a special circumstance.’[33] The decision-maker must show there was ‘a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system.’[34]
[30] Beadle and Director-General of Social Security [1984] AATA 176 at [12].
[31] Groth v Secretary, Department of Social Security [1995] 40 ALD 541 at [545].
[32] Riddell v Secretary, Department of Social Security [1993] 114 ALR 340 at [347].
[33] Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570 at [580].
[34] Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114 at [80].
The Tribunal must have regard to whether or not, by exercising the discretion, it is achieving or frustrating the objects of the Act, and whether strict enforcement of the liability of a section would be unjust, unreasonable or otherwise inappropriate.[35] The discretionary nature of the ‘special circumstances’ provision requires a consideration of the particular facts of each case. In undertaking this exercise, the Tribunal is required to factor in the scope and purpose of the compensation preclusion provisions so as to avoid making a determination that would frustrate the legislative intent: Re Ivovic and Director-General of Social Services.[36]
[35] Green and Secretary, Department of Social Security (1990) 21 ALD 772.
[36] (1981) 3 ALN N95.
In the second reading speech for the Social Security Legislation Amendment Bill (No1) 1995 it was noted, in part, that:[37]
The compensation recovery provisions of the act protect the social security system from ‘double dippers’, that is, those who might receive social security payments, as well as compensation, for the same period.
[37] Commonwealth, Parliamentary Debates, Senate, 21 June 1995, 1531 (Peter Cook, Minister for Industry, Science and Technology).
The purpose of the discretion in s 1184K is not to provide excess or subsequent relief (or a windfall) to people who have already been compensated for the relevant loss. In Lintern v Secretary, Department of Social Security,[38] the Tribunal noted that public money should not be used to improve or give gain to social security recipients.
[38] [1993] AATA 389.
The Respondent contends that the interests of the ‘broad public policy should be taken into account in determining whether ‘special circumstances’ exist.[39] This was highlighted by French J (as His Honour then was) in Secretary, Department of Social Security v Hales,[40] where he stated:
the taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth. This case primarily concerns the proper construction of a section of the Social Security Act 1991 (Cth) which provides for the waiver of debts where special circumstances are found to exist. There is a tension in the construction of such provisions between the needs for certainty of application and flexibility of response to the situations that may arise from time to time.
[39] RSFIC at [55].
[40] (1998) 82 FCR 154.
The Tribunal has considered the Applicant’s specific circumstances and finds, for the reasons that follow, that he has not demonstrated that they amount to ‘special circumstances’ so as to warrant the exercise of the discretion under s 1184K of the Act.
Notification
The Applicant claims that he was never notified by the Agency that it would recover the compensation charge amount.[41] The Respondent submits that the Applicant was notified in correspondence from Centrelink that his austudy payments could be affected if he were to receive compensation. At the hearing, the Applicant gave evidence that when he signed the settlement agreement on 1 March 2021, he was made aware by his lawyer that Centrelink could be recovering some amounts from the lump sum compensation.[42]
[41] Applicant’s statement, 3.
[42] Transcript, 8.
On the basis of the evidence before it, the Tribunal is satisfied that the Applicant received notification of the effect of a compensation payment on his austudy payment, and that there are no ‘special circumstances’ on this basis that warrant exercise of the discretion under s 1184K.
Austudy – Economic loss
Austudy is defined by s 23 of the Act as a ‘social security benefit’ and this is specifically captured as a ‘compensation affected payment’ for the purposes of s 1169(1) of the Act.
The Applicant told the Tribunal that after his motorbike accident in February he studied a Bachelor of Spatial Sciences, Honours and he graduated in April 2022.[43] He contends that because he was studying and receiving austudy payments during the compensation preclusion period, this should not constitute economic loss and not be subject to recovery through a compensation charge.[44] In his view, austudy is not a loss of income payment but rather a payment for undertaking study.[45]
[43] Transcript, 21-22.
[44] Applicant’s statement, p1.
[45] AAT1 decision [21].
The Respondent contends that there is no discretion available not to treat the Applicant’s austudy as being subject to a compensation preclusion period as this is the result of a ‘deliberate policy decision of the legislature’.[46] Insofar as this policy decision may produce a result that the Applicant sees as unjust in his particular situation, it is not a ‘special circumstance’ for the purposes of s 1184K of the Act.
[46] Clark v Secretary, Department of Employment and Workplace Relations (‘Clark’) [2007] FCA 1076 at [44].
It is well established that the calculation of a compensation preclusion period by reference to the statutory scheme is not dependent on the nature and quantum of any compensation for economic loss.[47] In Secretary, Department of Family and Community Services v Chamberlain (‘Chamberlain’) Kiefel J (as Her Honour then was) relevantly observed:[48]
… Further, the extent of the difference from the basis upon which the parties acted could not provide the necessary “special circumstance”. The statute has selected a figure which may operate in an arbitrary way.
The statutory objectives in utilising the formulae, referred to above, must also be borne in mind. It is not intended that a decision-maker be required to consider contentions about what part of the compensation reflected the economic loss component. That is so whether one has regard to the application of the formulae or the discretion under s 1184. The latter does not alter the objective and must be read in light of it.
[47] Clark at [75].
[48] Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67; (2002) 116 FCR 348 (‘Chamberlain’) at [34]-[35].
This has been recognised by the Tribunal in several recent decisions. In Viscuso and Secretary, Department of Social Services and (Social Services second review),[49] Member Reitano observed:
Second, it is not appropriate to dissect the statutory formula to try to estimate or make a decision about the part or portion of the compensation payment that represents future economic loss. Quite apart from the fact that it is objectively impossible to do so, the simple fact is that the formula laid down by the Act has, in effect, made that decision. The simple fact that the outcome of applying the formula might be seen in a particular case as unjust does not provide for special circumstances. There is nothing that permits an objective identification of the fact that the compensation paid did not include past and future economic loss. In fact, the evidence suggests the opposite.
[49] [2021] AATA 3811 (19 October 2021) at [51].
In Ward and Secretary, Department of Social Services (Social services second review),[50] (‘Ward’) Deputy President Sosso remarked:
As in so many preclusion period matters, the Applicant has drawn to the attention of the respective decision-makers, the disparity between the gross payout figure, the deemed economic loss component and the actual amount of money he received after paying legal costs and other fees.
The Tribunal appreciates the Applicant’s belief that this is an unfair situation; however, there is no discretion vested in the Tribunal to ignore this legislative deeming provision.
[50] [2022] AATA 57 at [76].
Whilst the Applicant believes that his austudy payments were not loss of income payments and therefore do not fall under economic loss, the Tribunal finds that their inclusion in the calculation of the preclusion period and charge amount is required under the Act and therefore do not constitute ‘special circumstances’.
Medical conditions
In his undated written statement, the Applicant wrote that he sustained a back injury in the motorbike accident that caused loss of 30% of the L2 height.[51] He still suffers significant pain on a daily basis from mid back pain and lower back pain which strikes nerves down his left and right legs. He also intermittently suffers from shoulder pain and clavicle and rib pain.[52] The injury has affected his mental health, and he suffers from ‘depressed state of mind, bad thoughts, always being edgy, deprived sleep, agitated, anxious.’[53]
[51] Applicant’s statement, 3.
[52]Ibid .
[53] Ibid.
The Applicant told the Tribunal that he continues to have treatment for his back injury, including hydrotherapy, and he takes regular pain medication, which in total costs him about $1,000 per month.[54] He sees a spinal cord specialist, Dr Mark Sheridan, and he may need to have surgery which will cost approximately $8,000.[55]
[54] Transcript, 7, 28.
[55] Transcript, 30; Applicant’s statement, 3.
The Respondent contends that the Applicant’s medical conditions and related expenses should not be treated as ‘special circumstances’. The Applicant’s compensation settlement was in relation to his accident, and the Applicant received compensation for associated medical and living expenses..[56] The Respondent further contends that there is insufficient evidence regarding the Applicant’s medical conditions and the impact on his day to day functioning or ability to work.[57]
[56] RSFIC, [65].
[57] RSFIC, [66].
Based on the evidence before it, the Tribunal finds that the Applicant’s state of health is not unusual or out of the ordinary in comparison to other income support recipients, or more severe than compensation recipients of similar age. The Applicant received compensation for medical expenses arising from the accident, and the Tribunal is not satisfied that his medical conditions amount to ‘special circumstances’ such that the discretion under s 1184K should be exercised.
Financial hardship

The Applicant was awarded the compensation settlement of $350,000 in March 2021. Of this amount, approximately $87,000 was paid to his lawyers for legal fees and disbursements,[58] $35,691.94 deducted for the compensation charge, and approximately $35,000 for Medicare. The Applicant told the Tribunal that he received a total of approximately $192,000 in March 2021.[59]
[58] The Applicant provided a screenshot from an email from his lawyer which lists legal fees totalling $86,787.49 (minus the Medicare deductions). This represents almost 25% of his total lump sum settlement amount.
[59] Transcript, 8.
At the Tribunal hearing, the Applicant confirmed that he has not had employment since the accident.[60] The Applicant told the Tribunal that in order to be fully qualified to work as a surveyor, he is required to do five exams with the Board of Survey and undertake two years’ (unpaid) work experience.[61] This is mainly field work, and he is unable to do this because of his back condition which prevents him from carrying more than five kilograms.[62] He has applied for a few positions but has been unsuccessful.[63] He has had difficulty finding a job with a company that will accept his condition.[64]
[60] Transcript, 21.
[61] Transcript, 23.
[62] Transcript, 49; Applicant’s statement, 3.
[63] Transcript, 24.
[64] Applicant’s statement, 3.
The Applicant gave evidence on 20 July 2021 to AAT1 that he had $25,000 remaining from the compensation settlement, which he was hoping to use to set up a business.[65] At the hearing, the Applicant told the Tribunal that he currently has ‘a couple of hundred’ in the bank remaining from the compensation settlement.[66] He said that he spent about $30,000 on surveying equipment, and about $40,000 on crypto-currency and an online equipment sales business that he operated from mid-2020 to the end of 2021.[67] The Applicant also used some of the settlement to repay a loan from his brother of $60,000, to give $12,000 to a relative overseas who was suffering from ill health and could not afford to get medical attention, and to purchase a classic car at a cost of $10,000.[68]
[65] T2, 10.
[66] Transcript, 16.
[67] Transcript, 18, Applicant’s statement, 2.
[68] Applicant’s statement, 2.
The Applicant told the Tribunal that he started gambling at the end of 2018. He initially withdrew $60,000 from his compensation settlement account, and then $50,000, $20,000 and $10,000, all of which he gambled.[69] He admitted that his gambling was ‘out of control’ and it is not something he is proud of.[70] He told the Tribunal that he gambled to take his mind off the pain he was experiencing, and if he did not have the back injury he would not have gambled. He is seeking treatment from a psychologist for his ‘depressed mood.’[71]
[69] Transcript, 25.
[70] Transcript, 39.
[71] Transcript, 27.
The Applicant told the Tribunal that he lives in a granny flat behind his brother’s house. He does not pay any rent, but in the past six months he has contributed to the utilities and paid $2,000 per month towards the mortgage.[72] He is not required to make these payments but does so when he is able to afford to do so.
[72] Transcript, 20.
The Respondent contends that given the Applicant’s stable living arrangements and the fact that he is not precluded by a preclusion period from applying for social security benefits, it would be unwarranted to find that the Applicant’s financial position gives rise to ‘special circumstances’ that justify treating all or part of his compensation payment as not having been made.[73]
[73] RSFIC, [76]
For financial hardship to be pertinent, a person’s financial situation must be exceptional, rather than merely straitened.[74] Financial hardship of itself does not amount to a ‘special circumstance’.[75] In Director-General of Social Security v Hales,[76] Shephard J of the Full Federal Court stated:
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.
[74] Re Colaiacolo and Secretary, Department of Social Security [1985] AATA 91 at [20].
[75] Re Hajar and Re Secretary, Department of Social Security (1988) 16 ALD 716 at 719.
[76] (1983) 78 FLR 373; 47 ALR 281 at 321,
In Ward, Deputy President Sosso observed:
It is axiomatic that a person who is the recipient of social security payments is in need of financial assistance from the Commonwealth. The social security system is designed to provide a safety net for persons who would otherwise be in severe financial strife. A person in difficult financial circumstances is not a person who automatically demonstrates that they satisfy the special circumstances requirement. Financial distress is an important, but not determinative, factor when assessing whether special circumstances exist because most social security recipients fall within this category.
In Black and the Secretary, Department of Social Security,[77] the Tribunal stated:
the Tribunal has consistently considered the reasonableness of the persons’ expenditure of compensation payments in determining special circumstances” while going on to say, “[i]n particular substantial loans to family members, monies spent on travel and cars, general extravagance have been considered to mitigate against special circumstances.
[77] [1994] AATA 291.
Other factors which may outweigh straitened financial circumstances include whether an applicant’s disposition of their compensation payment has been reckless. In Ward, Deputy President Sosso stated that ‘[w]here the Tribunal is presented with evidence of an applicant acting irresponsibly, which cannot be explained by underlying health or cognitive issues, this militates against a finding of special circumstances.’[78]
[78] Ward at [59].
In Davis and Secretary, Department of Family and Community Services (‘Davis’),[79] the applicant spent his compensation payout on smoking, drinking and gambling. The Tribunal observed:[80]
For most of his adult life the Applicant has been supported in a supplementary way by his sister, and his chronic smoking, drinking and gambling habits have cost her dearly. Even when he was in full-time employment he was not always paying board to her. His dependence on her increased significantly after he ceased work following his back injury, as his smoking, drinking and gambling habits increased. His spending on smoking, drinking and gambling apparently increased further since May 1997, and until all the money was gone. There is no evidence of addiction, and his behaviour can only be described as grossly irresponsible.
If the circumstances were different, and the Applicant had saved the money and carefully and safely invested it, then in addition to his house he would have had sufficient money to tide him over at a reasonable standard of living until the completion of his preclusion period. If the preclusion period is shortened or waived because of his reckless spending then that would be an invitation to others in similar circumstances to do likewise and then to become dependent on the public purse. One could anticipate the public outcry, and reasonably so.
[79] [1999] AATA 84.
[80] At [45]-[46].
In Gartside and Secretary, Department of Social Services,[81] the applicant received approximately $40,000 in compensation payments, and in a period of four weeks, spent between $20,000 and $30,000 on illicit drugs, mostly “ice”. There was no evidence before the Tribunal that the Applicant’s behaviour was caused, or contributed to, by either psychological imbalance and/or social and intellectual disadvantage.
[81] [2017] AATA 45.
The Tribunal made the following finding:[82]
I find on the evidence before the Tribunal, that the Applicant’s conduct was grossly irresponsible and reckless. Clearly the Applicant was remorseful after the event, but that does not explain or excuse what transpired. Further, there is no medical and circumstantial basis for explaining away what occurred. Accordingly, the conduct of the Applicant in the period between his payout and August 2015 militates against an exercise of the discretion.
[82] at [67].
The evidence before the Tribunal is that the Applicant expended a large amount of the compensation settlement on equipment to establish a surveying business, as well expending money in an attempt to pursue other business opportunities, none of which proved successful. In addition, the Applicant spent a considerable amount of the compensation settlement on gambling. He attributes his gambling addiction to his attempts to cope with the pain from his back injury. The Applicant’s evidence is that he has sought treatment from a psychologist, but this relates to his depressed mood rather than his gambling addiction.[83] The Applicant did not provide any reports from his psychologist in relation to the state of his mental health. The Tribunal finds that in gambling a large amount of his compensation settlement, the Applicant acted in a reckless and irresponsible manner.
[83] Transcript, 25, 27; Applicant’s statement, 3.
Relevant to the Applicant’s financial situation is that he is no longer serving a preclusion period, and therefore he is able to apply for income support benefits if he has insufficient money for his daily living expenses. He told the Tribunal that he has considered applying for social security payments, but he has not done so because he
[does not] want to get into the habit where – because they do say they help you out finding work, but really (indistinct) start, like, attending social services, and – and they make you sit there for eight hours a day, and I – I don’t want to get into the habit and then spend it being a sort of in a circle, spending on gambling whatever I get from them.’[84]
[84] Transcript, 28.
On the basis of the evidence before it, the Tribunal is not satisfied that the Applicant’s difficult financial circumstances are exceptional, rather than merely strained, and finds that they do not warrant a finding of ‘special circumstances.’
Legal expenses
Paragraph 1 of the settlement agreement states that the compensation settlement of $350,000 was inclusive of legal costs and disbursements.[85] The Applicant told the Tribunal that he paid approximately $88,000 in legal fees, although he was ‘cornered into’ paying them.[86] In his statement he wrote that he believes his lawyers took advantage of his situation, and told him to settle the claim ‘so they can take the easy way out so that they don’t have to prepare for the hearing.’[87]
[85] T4, 117.
[86] Transcript, 16.
[87]Applicant’s statement, 3.
In Secretary, Department of Social Security v Hulls,[88] the Federal Court recognised excessive legal costs may amount to special circumstances, however only if the particular facts of the case make it special. In Secretary, Department of Social Services and Muir,[89] the Tribunal found that the payment of solicitor-client costs in the settlement agreement did not constitute special circumstances. In Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Waters,[90] the Tribunal found that the legal costs did not appear to be out of the ordinary and did not give rise to special circumstances. In Fitzgerald and Secretary, Department of Education, Employment and Workplace Relations,[91] the Tribunal found that legal fees were largely unavoidable and were not unusual or uncommon so did not constitute special circumstances.
[88] (1991) 22 ALD 570.
[89] [2013] AATA 831.
[90] [2011] AATA 666.
[91] [2008] AATA 271.
The Tribunal notes that the legal fees paid from the compensation settlement were approximately 25% of the total settlement amount. Without further information the Tribunal cannot be satisfied that the legal fees the Applicant incurred were excessive. If the Applicant had concerns in relation to the amount of the legal fees incurred, he could have explored the avenues of redress available to clients in these circumstances. There is no evidence before the Tribunal that he did so. The Tribunal therefore finds that the legal fees incurred were not unusual or uncommon, and accordingly do not constitute ‘special circumstances’.
After due consideration, the Tribunal cannot find that any of the circumstances claimed by the Applicant, either individually or in combination, meet the threshold of being ‘special circumstances’ for the purposes of the Act. Accordingly, the Tribunal is not satisfied there is a reason to exercise the discretion in s 1184K of the Act to reduce the length of the lump sum preclusion period.
e) Should all or part of the compensation charge may be written off or waived?
The Respondent contends that the compensation charge cannot be written-off as the amount has already been fully recovered by the Agency and none of paragraphs 1236(1A)(a)-(e) of the Act apply.
The Tribunal is satisfied that in circumstances in which the compensation charge has been fully recovered by the Agency, it cannot be written off pursuant to s 1236 of the Act.
The compensation charge arose due to the Agency applying a compensation preclusion period over a time where the Applicant was in receipt of austudy and newstart allowance, in accordance with provisions of the Act. There is no evidence before the Tribunal that the Agency made any error in the calculation or implementation of the compensation preclusion period and the resultant calculation of the compensation charge. Nor is there any evidence of delay or procrastination on the Agency’s part in acting on advice from NRMA about the lump sum settlement amount. The Tribunal therefore finds that s 1237A of the Act has no application.
The term ‘special circumstances’ in s 1237AAD has a meaning that is analogous to the term in s 1184K of the Act as discussed above.
In Davy and Secretary Department of Employment and Workplace Relations,[92] Deputy President Forgie considered the meaning of ‘special circumstances’ in the context of s 1237AD:
… ‘special circumstances’ are not merely directed to the person’s own circumstances. Rather, they are directed to those that are ‘special circumstances…that make it desirable to waive’. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it… He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement… The system of administration of the Social Security Act does not visit any injustice for many if not all social security recipients but it did not lead to any injustice or unfairness on Mr Davy that is not visited, or potentially visited, upon all other recipients of social security payments under the Act. Therefore, I am not satisfied that there are special circumstances that make it desirable to waive the debt under s 1237AAD of the Act…
[92] [2007] AATA 1114 at [80].
The Tribunal is not satisfied that the Applicant’s compensation charge should be waived under s 1237AAD of the Act as his individual situation in the context of the general administration of the social security system does not amount to ‘special circumstances’.
In making this finding, the Tribunal notes that the Applicant is no longer serving a preclusion period, and therefore he is able to apply for income support benefits if he has insufficient money for his daily living expenses. Further, the Tribunal has had regard to the fact that if the Applicant’s compensation charge were waived, it would result in him receiving a social security benefit and compensation over the same period which the compensation recovery provisions of the Act were designed to prevent.[93]
[93] Paragraph 4.13.4.10 of the Social Security Guide, Version 1.300 - Released 7 November 2022 states ‘The compensation recovery provisions of social security law are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time. Note: The special circumstances provisions should not be used to override this basic legislative intention.’
CONCLUSION
For the reasons outlined above, the Tribunal finds that the Applicant did receive a lump sum compensation payment, with respect to which the Agency correctly calculated and applied a compensation preclusion period and recovered a compensation charge amount of $35,691.94.
The Tribunal further finds that there are no ‘special circumstances’ under s 1184K of the Act to reduce any of the lump sum compensation amount received by the Applicant, and there are no grounds on which the compensation charge should be written off or waived.
DECISION
The Reviewable Decision is affirmed.

I certify that the preceding 99 (ninety-nine) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr Linda Kirk

...............................[SGD].........................................
Associate
Dated: 6 December 2022

Date(s) of hearing: 1 July 2022

Applicant: In person

Solicitors for the Respondent: Mr T Chang, Services Australia

Date(s) of hearing:	1 July 2022
Applicant:	In person
Solicitors for the Respondent:	Mr T Chang, Services Australia