Davis and Department of Family and Community Services [1999] AATA 84 (16 February 1999)

Last Updated: 18 February 1999

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [1999] AATA 84

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1998/1499

GENERAL ADMINISTRATIVE DIVISION )

Re Garry Thomas DAVIS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mrs M T Lewis, Senior Member

Dr P D Lynch, Member

Date 16 February 1999

Place Sydney

Decision The Tribunal affirms the decision under review.

..........Sgnd M T Lewis.............

M T Lewis,

Presiding Member

CATCHWORDS

SOCIAL SECURITY - settlement of compensation payment for industrial back injury - preclusion period - Applicant later suffered onset of chronic illness - Applicant denied Newstart Allowance - whether special circumstances justified treating compensation payment as not having been made - no connection between chronic illness and injuries sustained in the industrial accident - realisable asset - consideration of circumstances as a whole

Social Security Act 1991 - ss 1184

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

Re Nikolov and Secretary, Department of Social Security (AAT 7452, 7 November 1991)

Re Kulakov and Secretary, Department of Social Security (1991) 63 SSR 879

Re Secretary, Department of Social Security and Schipp (1995) 39 ALD 790

Secretary, Department of Social Security v (D A) Smith (1991) 23 ALD 277

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

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

Re Secretary, Department of Social Security v Bolton (1989) 18 ALD 464

Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985)

Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716

Re Stern and Secretary, Department of Family and Community Services (AAT 54/1999, 11 January 1999)

REASONS FOR DECISION

15 February 1999 Mrs M T Lewis, Senior Member

Dr P D Lynch, Member

1. On 23 October 1998 Garry Thomas Davis ("the Applicant") lodged an application for review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 21 September 1998 and notified to him on 13 October 1998 (T.2). The SSAT affirmed a decision of a delegate of the Secretary, Department of Social Security as it then was (now the Department of Family and Community Services) ("the Respondent") dated 12 June 1997 and affirmed by an authorised review officer on 1 September 1998, that during the period 17 May 1997 to 25 March 2005 the Applicant is precluded from receiving a "compensation affected" social security payment.

2. At the hearing the Tribunal had before it the documents provided by the Respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975. The following documents were tendered as evidence on behalf of the Applicant -

* Certificate of Registration of Business Name Garry's Couriers, dated 12 March 1998 (exhibit A)

* St George Bank Account Statement in name of Garrys Couriers dated 30 November 1998 (exhibit B)

* Letter from J Reygersberg, Welfare Supervisor, Holroyd Community Aid & Information Service Inc., dated 19 January 1999 (exhibit C)

* Report from Dr N Wah Cheung, consultant endocrinologist, Westmead Hospital and Community Health Services, dated 11 November 1998; and report from Dr T Becker, Tripple 333 Medical Centre, dated 20 January 1999 (exhibit D)

* Statutory Declaration of Sandra Helen Davis, dated 16 November 1998 (exhibit E)

* Report of Dr Jacob George, consultant Hepatologist, dated 27 November 1998 (exhibit F) and his clinical notes dated 27 November 1998 (exhibit G).

3. The Applicant gave oral evidence at the hearing, and Dr George and Ms Sandra Davis gave oral evidence by conference telephone. Ms Annette Dragona gave evidence on behalf of the Respondent.

background

4. It is not at issue in these proceedings that the Applicant sustained a back injury on 10 October 1990 while employed by Woolstar Pty Ltd as a storeman. He continued to receive his salary until he was dismissed from this employment in approximately July 1991. He then received periodical workers' compensation payments until he was granted Disability Support Pension from 4 March 1993. On 15 March 1994 the Compensation Court determined that the Applicant's periodic payments should continue and he received a backdated award of compensation. Then on 16 May 1997 he received $330,000 in settlement of his workers' compensation claim, and on 12 June 1997 he was advised by the Respondent of the imposition of a preclusion period until 25 March 2005 in respect of "compensation affected social security payments" (T.15).

5. On 4 August 1998 the Applicant lodged a claim for Newstart Allowance which was rejected because of the preclusion period which had already been imposed (T.23). The correctness of the calculation of the preclusion period is not at issue. Pursuant to s 1184 of the Social Security Act 1991 ("the Act") the Applicant's case is that the Tribunal should determine that special circumstances exist and that the whole of the compensation monies received by the Applicant should be treated as not having been made.

the legislation

6. Section 1184 of the Act provides -

(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

(a) not having been made; or

(b) not liable to be made;

if the Secretary thinks it is appropriate to do so in the special circumstances of the case.

(2) If:

(a) a person receives or claims a compensation affected payment; and

(b) the person's partner receives compensation; and

(c) the set of circumstances giving rise to the compensation are not related to the set of circumstances that give rise to the person's receipt of or claim for the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not in itself constitute special circumstances for the purposes of subsection (1).

the evidence

7. The Applicant was aged 43 years at the time of the hearing. He is single and has no dependents. He said that he returned from overseas in 1981 or 1982 (aged about 26 years) and went to live with his sister, Ms Sandra Davis. He occupied a room in her house for some time, and then occupied a separate dwelling at the back of her house.

8. The Applicant received his compensation settlement in May 1997, and on 26 June 1997 he signed a contract on the purchase of a house at 57 Leach Road, Guildford. The purchase price of the property was $150,000. Stamp duty and conveyancing costs amounted to about $5,000. He moved in on about 7 August 1997, and then proceeded to arrange renovations which cost about $9,000 and labour which cost about $12,000. He bought lounge and dining room furniture for about $4,100 and white goods for about $4,000. At the hearing he estimated that he spent about $50,000 or $60,000 on house renovations. He bought a television, hi-fi system and a collection of CDs totalling $2,800. He bought all new furniture for the house. The Applicant said that $20,000 of the settlement payment was deducted as legal costs and an amount of $33,000 was paid to the Health Insurance Commission, and subsequently refunded in September 1997.

9. The Applicant said that he paid board of about $60 per week to his sister when he first lived there, and by the time of his accident in 1990 this had increased to $120 per week. He said that he stopped paying her board as soon as he went off work following the accident, and noted that this change in their financial arrangement emerged at that time because he had time to spend more money when he was not at work. Ms Davis said in her oral evidence that prior to his accident the Applicant paid board or rent "occasionally, not often". She added "Garry drank a lot, smoked a lot and betted on the horses a lot. He didn't make a lot of contribution ...". She said that although he started to pay $120 a week after the accident it then stopped. She added -

He wasn't getting any money himself until later on, until he had all this sorted out and when he was getting money he was only getting a couple of hundred dollars himself and he was drinking that. So he had nothing. He had nothing to give to me.

In cross-examination Ms Davis said -

Q. Now, he was getting at various times compensation or social security payments between the time of his accident and the time of his damages settlement?

A. As I explained Garry would get that money, he would owe money everywhere in the street from money that he'd borrowed to drink and buy cigarettes. He would owe it everywhere, not only to me, to other people who perhaps you could have called in there as well. He borrowed all the time, he had to pay it back and by the time he paid back he was back into behind the eight ball, he had no money again.

Q. And where was the money going?

A. Drinking, smoking - - -

Q. Gambling as well?

A. Probably, I don't - you know, as Garry's told me, what he does with his money is his business. It's his money, he could do what he likes with it. I understand that, I mean, I'm not his keeper or his mother or anything like that.

10. Ms Davis also said that for the last twenty years she had worked two jobs, including a full-time well-paying job as an accounting supervisor. During the time the Applicant lived with her she also had two dependent children. She estimated that she bought three or four cartons of beer a week for the Applicant after his back injury. She said -

I would buy him cases of beer, he would ring me up and say could you bring me a case of beer home, I have no cigarettes, can you buy me a packet of cigarettes. This happened quite often, more often than not. Then sometimes he would have no money. I've got no money I would like to go out. So I would give him $50, $100 and he would go to the club or he would go somewhere. I was always doing that.

Ms Davis also said -

He's always been a drinker. For as long as I can remember Garry he's been a drinker, excessively sometimes, sometimes not.

11. The Applicant claimed that he repaid a total of $57,000 to his sister when he received his compensation settlement. Of this, $27,000 was made in one payment, and the remainder was paid in cash amounts of $2,000 when his sister required them. Ms Davis confirmed this evidence. She said that all the money was used by her on renovations to her home at the time the Applicant paid it to her. In a statutory declaration dated 16 November 1998 she said that the total cost of keeping the Applicant during the six year period was $81,744 (exhibit E). She broke that amount into weekly costs for board and food, cigarettes, beer, electricity and gas, and telephone. She considered, therefore, that the amount of $57,000 repaid to her was fair and justified.

12. The Applicant did not work after his back injury. He described the period after his back injury and until he received the compensation settlement as "six and a half years of hell". He had back surgery in October and December 1995 (exhibit F), and in his oral evidence he said he was advised by his surgeon that after two years "then you can decide what you can do". After he received the compensation settlement in May 1997 he said that although he knew he could not return to work as a storeman he considered that he could work as a courier. He brought a Toyota utility in September 1997 to use for work as a courier. The Tribunal notes that his bank account (T18, p63) shows a withdrawal from his bank account on 8 September 1997 for $8940.

13. By 25 September the Applicant had $19.27 left in his St. George bank account, but the next day an amount of $33,000 was deposited, which the Applicant confirmed in his oral evidence was a back payment from the Health Insurance Commission. By 24 November 1997 his bank balance had reduced to $43.81. In his oral evidence he admitted that in December 1997 he registered with the Commonwealth Employment Service as a jobseeker, and in cross-examination he said that it was his intention to claim only as a job seeker and not to claim any benefits because he knew that he was unable to receive benefits at that time. He said that he registered as a precaution in case he was unsuccessful in finding employment as a courier. The Tribunal notes that he completed sections 1 and 2 when he registered, thereby also claiming Newstart Allowance while he was looking for work. At that time he noted that he had $6.01 in his bank account (T16). However in answer to a question on the application form asking whether he was claiming Newstart Allowance he ticked "no". In a supporting statement signed by the Applicant and dated 10 December 1997 (T18) he said -

I wish to advise the Department that since I was last in receipt of disability support pension in Nov. 1993 I have been paid weekly compensation from the HIH Insurance Company and have been awarded a lump sum payment of $310,000. The lump sum is now spent, I have bought a new house, furniture, car, paid back a large amount to my sister who lent me monies, one repayment consisted of $27,000, and other amounts of $2,000 a time was repaid. I believe I am now fit for work and am seeking suitable employment. The amount spent on my vehicle was $8,990.

14. In answer to questions in the application form as to whether he suffered from a medical condition or disability which prevented him from working at least eight hours a week, or from looking for work or doing certain types of work, the Applicant wrote "?". In his oral evidence he said that he expected to be questioned about these responses and he wanted to give a detailed statement in respect of each question. The Applicant's claim for Newstart Allowance was refused on 17 December 1997 because of the imposition of the preclusion period.

15. The Applicant's evidence to the Tribunal was that he first considered working as a courier a few months after he received his settlement. He said that he began working for ABC Couriers in January 1998 and on 12 March 1998 he registered the business name Garry's Couriers (exhibit A), for insurance purposes.

16. In another part of his evidence he said -

I believe that in the six months after my settlement I believe that, as I said, there was a lot of stress taken away through relief that after over six and a half years of going through hell and being put through hell, right. In that six months as I said, as you know already, I purchased a home, renovations have to be done, purchased a motor vehicle. My mind started to work a lot better than what it was in over six and a half years. I started to get my life back together. Now, in that six months I had a decision to make. The final decision had to be made around December, early January, whether I would be going into the workforce as a courier and only hinged on what my surgeon had said to me. After six months of waiting for that two year period to lapse, then I decided right, it was time to get into it.

17. The Applicant's evidence was that he worked 10 to 12 hour days as a courier, and ate a lot of fast food during that time. Soon after he commenced work he began to feel abdominal pain and discomfort, and this caused him to reduce his hours at work and to have to refuse some deliveries. His ability to courier was also limited when he began to experience dizzy spells and black outs at the wheel. ABC Couriers then told him that they could not provide him with more work while that problem continued, and he ceased work as a courier about June 1998. The Applicant has not received any income since that time and said he has survived on a tax return cheque and with the aid of community organisations. He said that his earnings were around $1,100 to $1,200 per fortnight for the first two or three pay cheques, but then his earnings dwindled to about $600, $700 or $800 per fortnight for another six weeks.

18. By June 1998 the Applicant had already attended his local doctor (now deceased), and was referred for investigations. An ultrasound performed on 16 June 1998 by Dr Hudson revealed that the Applicant suffered from diffuse pancreatic calcification and chronic pancreatitis (T.21).

19. The Applicant was referred subsequently to Dr Jacob George, consultant hepatologist, who confirmed the diagnosis of chronic calcific pancreatitis based on clinical examination and ultrasound in his report dated 27 February 1998 (exhibit F). He considered that the Applicant was unlikely to be fit for employment, based on the history of the Applicant suffering a severe degree of pain which is present on most days for most of the day. As there was no cure for the condition he was likely to be significantly impaired by pain in the long-term.

20. Dr George said in oral evidence that the condition was likely to have been in existence for a number of years. In the Applicant's case it was caused by his many years of heavy drinking. He considered that the Applicant's condition at present is moderate to severe, but at this stage there is no evidence of pseudo cysts which, when they occur, are invariably very painful. Notwithstanding this he accepted the history given to him by the Applicant that he now experienced abdominal pain five to six days a week for most of each day. He considered that this was consistent with the ultrasound findings and with his clinical experience of the condition. He also noted that there was some evidence of liver disease.

21. At the hearing the Applicant denied having told Dr George that he experienced pain on most days for most of the day. He said that he experienced abdominal discomfort most of the time, he did not experience pain on most days, but he had to be careful about the type of food which he ate and the amount which he took at any one time, and he had to avoid fast movements, in order to avoid pain. He told the Tribunal that he experienced severe pain about once every three weeks. In his oral evidence, despite the inconsistency on this issue, Dr George continued to be of the view that the Applicant was likely to be experiencing pain on an almost daily basis, ranging from mild to very severe, and that it was unlikely that he would be able to sustain gainful employment because of this now or in the future.

22. Dr George noted that the Applicant had had a history of peptic ulcer for some ten years, and he is now reviewing that condition to determine whether it is again active. He did not accept the Applicant's allegation that he could distinguish between the ulcer pain and pancreatic pain. The Applicant said that he had had no symptoms from his ulcer for the last two years. The Tribunal notes that the Applicant's history of onset of pancreatic pain followed more than eight years of very heavy drinking which continued, on the Applicant's evidence, until he commenced work as a courier. Dr George's evidence was that the condition could have become symptomatic because of heavy drinking. Dr George noted that the Applicant's pancreatitis was first diagnosed by his local doctor two years ago, which is a year before the Applicant claimed that he experienced the onset of symptoms. Presumably the Applicant was exhibiting some symptoms at that time in order to the diagnosis to be made.

23. In his oral evidence Dr George noted that the Applicant had told him after the first day of the hearing that he did not understand much of the hearing proceedings, and he did not understand the questions put to him when he was giving evidence. The Tribunal notes that the Applicant was aware at the end of the proceedings on the first day that the Tribunal needed to question Dr George because of the inconsistency between the history he took and the Applicant's evidence to the Tribunal. Although the Applicant was represented by his solicitor at the hearing, there was no indication that he did not understand the questions put to him.

24. The Applicant said that he had spent all the compensation settlement within about six months. He had continued to drink and smoke heavily. He admitted to having won $10,000 in lotto, but he said that his investment in gambling was also very high.

25. The Applicant acknowledged that the amount he received from the compensation settlement, less legal and other costs, in addition to the lottery winnings, totalled $320,000. He also said that he now has no savings and has been living on money from welfare organisations and that borrowed from family (exhibit C). He has an outstanding telephone bill and water rates, and he has not been able to insure his car.

26. When asked in cross-examination whether he had considered sharing his house with others in order to gain an income the Applicant said, "Why shouldn't I be allowed to have my own privacy?" He also questioned why he should have to live elsewhere and pay rent, which he considered to be "dead money", when he had his own home.

27. Annette Dragona, an employee of Centrelink gave evidence on behalf of the Respondent. Ms Dragona said that she was the author of a filenote recording a telephone conversation she had with the Applicant on 18 March 1994 (T.8, p19). The note stated -

A/N client called to adv his w/c matter was heard on Mon 14/3/94 & he was awarded a cont award of $247 pw backdated from March 93. He adv he will be going on for lump sum C/L s'ment also. He wanted to know if/when he had to pay back DSP payments. I adv if period overlaps betw pd I/C pay & pd DSS have pd, the lesser amt per wk to be pad back. I adv this should be done prior to his receiving monies but he should check our charge has come out when he does receive it. I then adv he may be precluded for a period of time (approx 12 mths on $55,000) on s/ment of C/L if WWC continues up to DOS. He understood & will adv Dept on receipt of monies & on final s'ment.

Ms Dragona was unable to recall the conversation documented in the note. She said that given her usual practice, the file note was a summary, rather than a detailed note of what was said.

submissions

* Applicant

28. It was submitted for the Applicant that he gave his evidence in an honest and forthright manner, and that the Tribunal should find that he was credible. It was submitted that he had not exaggerated his condition - rather the reverse. The inconsistency between the description of his pain to the Tribunal and to Dr George, did not render him an unreliable witness. Dr George was reasonably satisfied that the history of pain which he was given was consistent with his knowledge of the condition and his other findings. Moreover, it was submitted that there was no evidence to rebut the evidence of the Applicant.

29. It was submitted that the Tribunal should be satisfied that special circumstances existed so as to treat the whole of the compensation payment as not having been made; s 1184 of the Act. The compensation payment was in relation to the Applicant's back injury, which is now not the cause of his inability to work. Between 1990 and 1997 the Applicant described his lifestyle as "lousy" and "living through hell". He was depressed because of his lifestyle, causing him to smoke and drink excessively. He has always been a drinker. When the compensation payment was made the Applicant thought that "all his Christmases came at once". It provided him with a new lifestyle when he purchased his own home. It was conceded that the Applicant's spending was "flagrant". It was submitted, however, that if the whole of the compensation settlement was gambled or thrown away the Applicant's case may not be strong. Rather, he purchased a home and renovated it, and repaid his considerable debt to his sister. He intended to work, he bought a motor vehicle, registered a business name and opened a bank account for the business to enable him to work as a courier, and he commenced courier work initially working ten to twelve hours a day. It was submitted that the Applicant had left behind the lifestyle which he had had previously, and he had had no intention, prior to his serious pancreatic illness becoming symptomatic, of applying for social security payments. However, the Applicant is now suffering serious and chronic ill health and on the evidence of Dr George he has no capacity to work.

30. It was submitted that all these circumstances amount to special circumstances pursuant to s 1184 of the Act. The Applicant's representative referred to the landmark decision of the Tribunal Re Beadle and Director-General of Social Security (1984) 6 ALD 1, which held that the Tribunal should look at the whole of the Applicant's circumstances in considering whether they were "unusual, uncommon or exceptional so as to warrant payment of ...[social security benefit] earlier than the date from which it would ordinarily be paid". In this matter the Applicant now has no capacity to work and therefore he has no ability to mortgage his property. It was submitted that extreme financial hardship is a special circumstance (Re Beadle) and the Applicant is in extreme hardship. He was compensated for a back injury, he returned to the workforce and then developed an unrelated serious chronic illness. It was submitted that the Tribunal would be satisfied that the Applicant was not double dipping, and therefore this is a case where the Tribunal should exercise its discretion in the Applicant's favour.

31. It was also submitted that selling his house would not assist the Applicant beyond the next few years, and applying the decision of the Tribunal Re Nikolov and Secretary, Department of Social Security (AAT 7452, 7 November 1991) the ownership of the home does not hinder a finding of special circumstances. The Applicant would be unable to realise the equity in his house and obtain a mortgage because of his inability to work. Additionally, applying the Tribunal's decision Re Kulakov and Secretary, Department of Social Security 63 SSR 879 (AAT 7238, 14 August 1991) ill health is a relevant factor when considering special circumstances. This was confirmed in Re Secretary, Department of Social Security and Schipp (1995) 39 ALD 790. Although Schipp could be partially distinguished on the basis that Mr Schipp had impairment in cognitive functioning which had affected his understanding of the implications of the preclusion period and his ability to manage his finances, the decision indicated that the spending of a compensation payout does not automatically prevent a finding of special circumstances.

32. The Applicant's case also relied on the decision of the Federal Court in Secretary, Department of Social Security v (D A) Smith (1991) 23 ALD 277 where it was considered that s 156 of the Act as it then was, which in effect was similar to the existing s 1184, was to remedy those particular cases where the application of the arbitrary rule would create injustice. It was noted that the purpose of Part XVII (now incorporated in Part 3.14 of the Act), was intended to avoid a person receiving double payments for an inability to exercise an earning capacity, leaving the reference to "special circumstances" to remedy those particular cases where the application of the arbitrary rule to preclude payment would create injustice. In Secretary, Department of Social Security v a'Beckett (1990) 21 ALD 79 at 89 Von Doussa J. identified that the intention of the scheme for preclusion and recovery was "to prevent double payments arising from that part of a payment by way of compensation which is fairly to be characterised as damages or compensation for an incapacity for work".

* Respondent

33. It was submitted for the Respondent that there are no special circumstances in which any of the compensation received by the Applicant should be disregarded. The Applicant had an experience of repayment of compensation in respect of an earlier period of receipt of disability support pension in 1993 and it was submitted that he was fully aware of and understood the preclusion period requirement.

34. Circumstances must be unusual, uncommon or exceptional in order to be special. Although it is the Applicant's case that he is in straitened circumstances, that is not inherently special. It was submitted that regard must be had to the circumstances in which the hardship arose. The Applicant was precluded from receiving a compensation affected payment for almost eight years yet he disposed of the whole of his lump sum payment within five months without first testing his ability to earn. It was submitted that much of his spending was profligate and much of the remainder is accounted for poorly and inconsistently. It was only in retrospect that his alleged debt to his sister was calculated. It was only after he had no money left that he attempted employment, and then only after a claim for Newstart Allowance was refused. Moreover there is evidence that the Applicant has cited not only pancreatitis but also disability from his back condition as a reason for his inability to work.

35. It was submitted that the discretion provided for in s 1184 should be exercised consistently with the objects and purposes of the legislation, that is, to prevent double dipping, unless it would be unjust to enforce the liability for which the legislation otherwise provides. It was submitted that it is essential to the scheme of the legislation that the social security repercussions of a lifelong incapacity will be compressed into the finite preclusion period for which the Act provides. To shorten the preclusion period in this case is to frustrate the object of the legislation in the absence of any circumstances in which it would be reasonable to do so. It was submitted that it was incumbent upon the Applicant to husband his substantial settlement monies prudently, in order to provide for his upkeep throughout the preclusion period, but he failed to do so. Having so failed, he has, in addition, declined to ameliorate his situation by renting rooms in his house to others in order to provide an income. It was submitted that about half of the settlement money is represented by a realisable asset, that being the Applicant's house. There is no justification for treating the acquisition of a house as sacrosanct. The Applicant was a renter previously, and it is not unusual for compensation recipients to remain in the rental market. It was submitted that the discretion in s 1184 was not enacted to maintain compensation recipients in private housing or to preserve other "nest eggs". Against the background of the Applicant's intemperate expenditure of much of his lump sum it is not reasonable to expend public monies to preserve the assets which remain. For his immediate future upkeep, he should look to those assets and not to the public purse.

36. The Tribunal was reminded of the facts in Smith which were described by the Tribunal in that matter in the following way.

The facts clearly show in this case that Mr Smith never received any compensation for incapacity for work for the period when he received sickness benefit for hepatitis.... His unusual situation meant that for this part of the lump sum payment period, he could not be said to be in receipt of double payments for an inability to exercise an earning capacity. The factual situation was that he received only one payment, ie sickness benefit. The major reason for qualifying for the benefit (ie hepatitis) was the very reason he was precluded from being compensated for it (the hepatitis was not work-related). There never was, in fact, any double payment.

..... To continue to deprive Mr Smith of that which was paid to him by virtue of his rightful entitlement to sickness benefit on the basis that he is to be taken to have been compensated for it when in actual fact he was not, would in my view be unjust.

In relying on the Federal Court decision in Smith the Respondent noted the following statement of von Doussa J. -

In the common run of cases it will not be possible to conclude that during a period of eligibility for a pension which follows a compensable injury attracting a payment by way of compensation within the meaning of s 152(2)(a) that period of eligibility is unrelated to the compensable injury. The admitted absence of any relationship was a relevant circumstance of the case.

37. It was submitted that the facts in the present matter can be distinguished from the facts in Smith. The Applicant's orthopaedic injuries still preclude him from a range of occupations for the rest of his working life. It is part of what von Doussa J. referred to in Secretary, Department of Social Security v Banks (1990) 20 ALD 19 as an arbitrary scheme that the social security repercussions of lifelong permanent incapacity be compressed into the lump sum payment period rather than effecting social security entitlements for life. In the matter now before the Tribunal the orthopaedic condition is still a barrier to employment (see T25, T28, T16 p.33), although the Applicant now contends otherwise, and the Applicant has been compensated for it. The Applicant's case is one of the normal run of cases referred to by von Doussa J. in Smith. A decision maker should bear in mind that von Doussa J. in Banks refers to the Act's "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 purposes (at 26).

38. It was submitted that the Applicant's denial of his back problems being implicated in his inability to work as at August 1998 must be considered in the context of his denial of the entire content of the discussion recorded at T8, which on the oral evidence of Ms Dragona to the Tribunal, is not tenable.

39. It was submitted that the ratio of the Federal Court judgment in Smith is that it is permissible to take into account that there is no overlap between the lump sum preclusion period and the incapacity for which a person was compensated, but it is not required. Smith says nothing of the case where a person who is not in that situation has a deterioration of health. However Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464 does deal with that issue. In that matter the person's health deteriorated in circumstances that had nothing to do with the compensable injury, and the Tribunal took a global approach. In Re Bolton Deputy President Todd relied on Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985) that financial hardship needs to be exceptional, and Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 on the inequity of claiming financial hardship when a person owns a valuable asset, namely a house, and does nothing to realise on it. Mr Bolton had two unencumbered properties in one of which he lived. In Re Bolton the Tribunal emphasised the need to keep an overview of the whole of the matter and the decline of the applicant's health was not considered paramount (at 466).

40. It was submitted, on the basis of the abovementioned decisions, that the Tribunal must see the Applicant's current health in a wider context. Serious though his medical condition may become there is no sufficient evidence before the Tribunal at present to indicate its severity because investigations are still proceeding. He experiences pain which is relieved by Panadol. These current health problems were presaged by lesser abdominal episodes, and have to be seen in the context of the Applicant having had several good warnings about preclusion periods. He spent all his money within the space of five or six months before trying the workforce, he entered the workforce for the first time in nearly eight years, working up to 12 hours per day. Along the way he wasted an unspecified amount of money on gambling and alcohol. He denies that he has any psychological dependence on alcohol, or anything which might ground an argument that he is medically incapable of managing a lump sum compensation payment. He could have had his house and enough money to survive the preclusion period, but he chose "to spend and spend" and should not be rewarded for intemperance. He has a real asset which ought to be used for his support before recourse to the public purse. To preserve a house in a situation where there are no extraordinary circumstances like family responsibilities, or psychiatric disabilities which prevent proper management of money, or cognitive disorders, invites every solicitor to advise his/her client to spend their lump sums on homes "and then call the Commonwealth's bluff when the money runs out". The Applicant has not even been prepared to mitigate his hardship by taking in boarders, a reluctance which he has not satisfactorily justified.

41. This matter was distinguished from the Tribunal's decision Re Stern and Secretary, Department of Family and Community Services (AAT 54/1999, 11 January 1999). Stern suffered from post-polio syndrome which was a pre-existing illness. , Subsequently he sustained a compensable injury, and was already on disability support pension before he had the compensable injury. It was established that there was no economic loss component in the lump sum payment, and on that basis the compensation payment was treated as not having been made. In that matter as the Applicant was already receiving disability support pension the decision of the Federal Court in Smith was relevant.

consideration of evidence and findings of fact

42. The Tribunal is unable to give a great deal of weight to the Applicant's evidence. Some of his oral evidence was clearly inconsistent with contemporaneous documentary evidence, and the Applicant did not satisfactorily justify the inconsistencies. The evidence of Dr George about the Applicant's attitude to his evidence also raises doubts about the quality of the Applicant's oral evidence for whatever reason. The Tribunal has reflected on the proceedings very carefully and is satisfied that the Applicant was given every reasonable chance at the hearing to give his evidence in a careful and truthful way, and that the hearing procedure was not wanting.

43. The Tribunal makes the following findings of fact -

* The Applicant sustained a back injury for which he received a lump sum compensation payment of $330,000 on 16 May 1997. An amount of $20,000 was deducted from the award as legal costs. He had surgery to his back in October and December 1995. He has a permanent impairment in his back and as a result he is unable to undertake his pre-injury employment as a storeman. On the contemporaneous evidence, which the Tribunal prefers on this issue, the Applicant continued to have difficulty with his back which affected his capacity to work, as at August 1998.

* The Applicant purchased a house for $150,000 at Guildford, in mid 1997, and subsequently, on his own evidence, he has spent some $50,000 to $60,000 on renovations. In the absence of any formal valuation of the property, the Tribunal finds that this property is a realisable asset at approximately $200,000.

* Until the Applicant purchased the abovementioned property in 1997 he has lived at his sister's home since 1982. He has never previously owned his own home. He lived at his sister's house, with an agreement that he paid her $60 to $120 per week board, while he was employed up to the time of his work injury in 1990. On the evidence of Ms Davis, which we accept, the Applicant paid board to her from time to time but not regularly, until the time of his injury in 1990. The Applicant's only other asset apart from the new furniture and equipment which he bought for his house is a Toyota utility vehicle for which he paid approximately $9,000 in September 1997.

* Notwithstanding that the Applicant was in receipt of weekly compensation payments or disability support pension for most of the interval between 1990 and May 1997, he did not make any payments of board to Ms Davis throughout that period. In addition, because of his heavy smoking, drinking and gambling habits during that period, Ms Davis frequently and regularly supplemented his income to support these habits. The Applicant incurred a debt to Ms Davis during this period in the amount of $57,000 and which he repaid to her in instalments over a few months from his compensation settlement monies. On the evidence of Ms Davis the Tribunal accepts that the Applicant's indebtedness to her over the total period of his residence in her house is significantly in excess of the amount he paid. Nonetheless there is no evidence that she is claiming any additional amount from him.

* The Applicant has had a lifelong drinking habit and he has been a heavy gambler. There is no evidence that he is continuing these habits at least since December 1998 when he found that he was unable to tolerate alcohol because of his chronic pancreatic disease. There is no evidence that the Applicant has been addicted to gambling or drinking despite the chronicity of the habits.

* The Applicant is unmarried and he has no dependents.

* In January 1998 the Applicant commenced work as a courier using his utility truck. For the first six weeks he worked 10 to 12 hours per day, but then he started to develop abdominal pain and discomfort and his hours of work, and consequently his income, were reduced significantly.

* The Applicant has suffered from a chronic gastric condition for approximately ten years, and in addition chronic pancreatitis was diagnosed two years ago. Since June 1998 the Applicant's chronic pancreatitis has caused him sufficient pain and discomfort for him to seek medical treatment and to cease work. On the evidence of Dr George the Applicant is unfit to perform any work, and that is likely to continue permanently. The Applicant's condition of chronic pancreatitis was likely to have been present for some years. On the basis that it was diagnosed two years previously it is probable that the Applicant was experiencing symptoms from that condition prior to commencing work as a courier, although there is no evidence that the symptoms were of a nature which prevented him from working. The Applicant also suffers from liver disease which at this stage is asymptomatic. Both his liver disease and pancreatitis are conditions arising from his previous heavy drinking habit.

* The Applicant had no money left from his compensation settlement by 25 September 1997, some four months after it was received. He then received $33,000 from a Medicare refund, and by 24 November 1997 he had nothing left in his bank account. In addition, he won $10,000 from gambling since he received his compensation settlement. He now has no savings and has sundry debts because of his inability to pay bills such as telephone.

* The Applicant commenced work as a courier only after he had spent all his money.

44. The case law requires the Tribunal to take into account the whole of the Applicant's circumstances in considering whether he meets the test of 'special circumstances'; Beadle. There is no doubt that the Applicant is experiencing extreme financial hardship. He has no income whatever, he is living on money from family and community welfare organisations, and he has a preclusion period which lasts until March 2005. In order to maintain any level of health in the face of his chronic pancreatitis he needs to have a diet with a high food value. While the Applicant owns his own house, he is unprepared to rent rooms in the house in order to secure an income. While he is not employed he is not likely to be able to obtain a loan using the house as an asset. Apart from providing his residence, the house is a financial liability insofar as he needs to pay rates, water, electricity and general maintenance.

45. 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 this behaviour can only be described as grossly irresponsible.

46. 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.

47. While the Tribunal accepts that the Applicant cannot be expected to live as he is with the help of family and philanthropic organisations and without income until March 2005, he has a realisable asset in his house, and while it is likely that that asset will have to be sold if the preclusion period is not waived, that is not the only alternative. The house could return income if the Applicant was prepared to rent it, although it may not return him sufficient money to live independently. The Tribunal hastens to add that if the house is sold in order to finance the Applicant's living expenses until March 2005, he would be well advised to enter into some trust arrangement for the funds so that they are protected from the same fate as much of the rest of his compensation settlement.

48. The Applicant's chronic pancreatitis, being a condition which was not precluding him from working at the time he spent his compensation settlement, and being a condition which was not related to the back condition for which he received the compensation, is a factor which the Tribunal must take into account with all the other circumstances in this case, but it is not a factor which the Tribunal finds outweighs the other circumstances already noted. Chronic ill health was a contingency for which the Applicant made no allowance in proceeding to spend his money as he did, nor did he make any allowance for any of a large number of contingencies which may have interfered with his continuing to earn money from his employment until the end of his preclusion period.

49. On the evidence before the Tribunal we are reasonably satisfied that no special circumstances exist to justify the treatment of whole or part of the compensation payment as not having been made. Therefore, the Tribunal will affirm the decision under review.

I certify that this and the 21 preceding pages are a true copy of the decision and reasons for decision herein of

Mrs M T Lewis, Senior Member

Dr P D Lynch, Member

Signed: ........Sgnd Rachel Harris...................................

Associate

Date/s of Hearing 21 and 30 January 1999

Date of Decision 16 February 1999

Counsel for the Applicant N/A

Solicitor for Applicant Mr I Bertoia, Legal Aid Commission

Counsel for the Respondent N/A

Advocate for the Respondent Mr J Kenny, Admin Law Section,

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