Shaw and Secretary, Department of Family and Communtiy Services [2000] AATA 168 (3 March 2000)

Last Updated: 13 March 2000

DECISION AND REASONS FOR DECISION [2000] AATA 168

ADMINISTRATIVE APPEALS TRIBUNAL )

) NoW1999/216

GENERAL ADMINISTRATIVE DIVISION )

Re KEVIN ALAN SHAW

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Associate Professor S D Hotop, Senior Member

Date 3 March 2000

Place Perth

Decision The decision under review is affirmed.

............(sgd S D Hotop).............

Senior Member

CATCHWORDS

SOCIAL SECURITY - lump sum compensation payment -preclusion period - whether applicant received timely notice of preclusion period - whether special circumstances - whether whole or part of compensation payment should be treated as not having been made

Social Security Act 1991 - ss 17, 1165, 1184(1)

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

Haidar v Secretary, Depart Department of Social Security (1998) 28 AAR 288

Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61

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

REASONS FOR DECISION

3 March 2000 Associate Professor S D Hotop, Senior Member

1. This is an application by Kevin Alan Shaw ("the applicant") for a review of a decision of the Social Security Appeals Tribunal ("SSAT"), dated 12 May 1999, affirming a decision of an Authorised Review Officer ("ARO") within Centrelink, dated 11 February 1999, that the applicant was precluded from receiving social security for the period from 11 July 1998 to 8 July 2005.

2. At the hearing the applicant appeared in person without representation and the Secretary to the Department of Family and Community Services ("the respondent") was represented by Mr S Ellis of the Advocacy and Administrative Law Team, Centrelink. The Tribunal had before it the documents ("T documents") lodged by the respondent pursuant to s37 of the Administrative Appeals Tribunal Act 1975 and the following documentary exhibits tendered by the respondent:

* "Module C - Compensation and damages" form lodged by the applicant with Centrelink on 29 September 1998 (R1)

* letter from Centrelink to the applicant, dated 6 October 1998 (R2)

* letter from Centrelink to Anthony Torre & Monaco, dated 6 October 1998 (R3)

* letter of acknowledgment from the applicant to Anthony Torre & Monaco, dated 22 May 1998 (R4)

* Consent Judgment, District Court of Western Australia, dated 9 July 1998 (R5)

* letter from Mr S Ellis of Centrelink to Anthony Torre & Monaco, dated 26 October 1999 (R6)

* letter from Anthony Torre & Monaco to the applicant, dated 29 October 1999 (R7)

* letter from Mr S Ellis of Centrelink to Ms C Osborn, Associate, Administrative Appeals Tribunal, dated 8 December 1999 (R8).

Oral evidence was given by the applicant and, on behalf of the respondent, by Ms J Fisher.

THE FACTUAL BACKGROUND

3. The relevant background facts, which are not in dispute between the parties and as found by the Tribunal on the basis of the T documents and exhibits, are as follows.

4. On 30 May 1995 the applicant seriously injured his back in a work-related accident, following which he received weekly payments of compensation until 10 July 1998.

5. The applicant claimed damages against his employer in respect of the abovementioned injury and, on 9 July 1998, a Consent Judgment was entered for the applicant in the amount of $300,000 plus costs. (R5)

6. On 29 September 1998 the applicant lodged with Centrelink a "Module C - Compensation and damages" form indicating that he had received weekly compensation payments until 10 July 1998, and a lump sum compensation payment of $294,688 on 28 July 1998, in respect of his work-related injury of 30 May 1995. (R1)

7. By letter dated 6 October 1998 an officer of Centrelink informed the applicant that, by virtue of his lump sum compensation payment, he was not eligible to receive social security payments for the "preclusion period" from 11 July 1998 to 8 July 2005. (R2)

8. By letter dated 6 October 1998 an officer of Centrelink advised the applicant's solicitors in general terms of the effect of a compensation payment on his current and future social security entitlements. (R3)

9. On 15 January 1999 the applicant requested an internal review of the decision to impose a social security preclusion period until 8 July 2005. (T6)

10. On 1 February 1999 the original decision maker decided to affirm that decision and so notified the applicant by letter dated 1 February 1999. (T8, T9)

11. On 8 February 1999 the applicant requested a review by an ARO of the original decision maker's decision.

12. By letter dated 11 February 1999 and ARO notified the applicant that he had decided to affirm the original decision maker's decision. (T12)

13. On 12 April 1999 the applicant applied to the SSAT for review of the ARO's decision. (T14)

14. On 12 May 1999 the SSAT affirmed the ARO's decision. (T2)

15. On 7 June 1999 the applicant lodged with this Tribunal an application for review of the SSAT's decision.

THE APPLICANT'S EVIDENCE

16. The applicant first referred to the settlement of his claim for damages in respect of his work-related injury. He told the Tribunal that he received a total net amount of about $294,000 and that this sum was paid to him in three main instalments - namely, $167,000 on 22 July 1998, $60,000 on or about 5 August 1998, and $50,000 on or about 10 August 1998. He added that he received a final small instalment of $1,000 in December 1998. The Tribunal notes, however, that, according to a letter from the applicant's solicitors dated 12 August 1998 (T5), the settlement amount of $294,688 was paid to the applicant as follows:

* $167,349.35 on 20 July 1998;

* $71,763.40 on 4 August 1998;

* $25,575.25 on 12 August 1998;

* $30,000 to be paid by Health Insurance Commission.

17. The applicant told the Tribunal that he did not receive any communication from Centrelink in relation to his damages payment and that he first contacted Centrelink just after Christmas in 1998. He said that he first applied to Centrelink for a pension on 15 January 1999 and he then spoke to an officer named "Jane" who informed him that he could not have any social security benefits because of the preclusion period. Jane then wrote a statement, on his behalf, requesting a review of the decision to preclude him from claiming social security until July 2005. The applicant acknowledged that document T6, dated 15 January 1999, was a copy of that statement.

18. The applicant was referred to the "Module C - Compensation and damages" form (Exhibit R1) signed by him and his partner, dated 25 September 1998, and lodged with Centrelink on 29 September 1998. The applicant responded that that form might relate to his partner's family payments. When it was suggested to the applicant that that form related to him and not his partner, he said that it might relate to his attempt to obtain a Health Care Card.

19. The applicant was then referred to a letter from Centrelink addressed to him, dated 6 October 1998 (Exhibit R2), containing specific information about the relevant preclusion period. He said that he did not remember receiving that letter and reiterated that "the only time (he) found out about a preclusion period was when (he) applied for social security". (Transcript, p12)

20. The applicant was next referred to a handwritten letter to his solicitors, signed by him and dated 22 May 1998 (Exhibit R4), which stated as follows:

"I Kevin Shaw do hereby instruct you to settle my claim for damages from the accident on the 30^th of May 1995 for the sum of $300,000 plus a contribution towards costs.

I acknowledge that you have told me that if I went to court I could achieve better than this but on the basis of the letter from the defendant dated 5^th May I am not prepared to take the risk of going to court.

I agree that you have told me that once the claim is settled I will have no further claim for anything arising from the accident, even if my condition deteriorates.

I authorise you to pay your costs, the barrister's fees and Mr Rando's account from the proceeds of my claim and that I will receive $293,000 nett after payment of all expenses. I acknowledge that this amount is in addition to all expenses and payments made to date. I have spoken to DSS and I understand that I will have a period during which I will not receive social security payments which will be between 6 and seven years. I understand that payments of compensation will continue until judgment, a period of about 3-4 weeks."

The applicant said that, when he signed that document, he was heavily dosed up on morphine and had "no comprehension of what was going on". He said that he did not know who wrote the document and that it was presented to him and he was asked to sign it. He added that he "didn't even know (he) had signed anything" and that he was not given a copy of the document. He denied that he had "spoken to DSS" and added:

"I had no reason to. I had a solicitor." (Transcript, p 19)

He added further that that document was the only document he had received from his solicitor which referred to a social security preclusion period, and that he had received that document only a couple of weeks ago. The Tribunal notes that that document (Exhibit R4) was sent to the applicant under cover of a letter from his solicitors, dated 29 October 1999 (Exhibit R7), pursuant to a letter from Mr Ellis of Centrelink, dated 26 October 1999 (Exhibit R6), requesting

"a copy of any correspondence or documents relating to the settlement of (the applicant's) workers compensation matter that related to the effect his settlement would have on prospective social security benefits, and in particular, relating to a 'preclusion period' or any period when he may be excluded from receiving such benefits."

21. The applicant also told the Tribunal about his use of the damages payments he received in July/August 1998, and his present financial circumstances. He said that he spent the money as follows:

* $180,000 on the purchase of a house, on or about 20 September 1998;

* $20,000 on the purchase of building materials for improvements to the house, on or about 18 October 1998;

* $24,000 on the purchase of a "Range Rover" motor vehicle, on or about 9 October 1998;

* $10,000 by way of repayment of a loan from his parents, in late July 1998;

* $7,000 by way of repayment of a loan from his father-in-law, in December 1998;

* $11,000 on payment of further legal fees, in July 1998;

* $7,500 on the purchase of furniture and payment of removal expenses, on or about 25 October 1998;

* $2,000 on payment of accountant's fees;

* $3,840 on payment of medical expenses;

* $1,000 on payment to Medicare;

* $4,000 on payment of living expenses from June to September 1998;

* $1,200 on payment of rent for a flat from September to December 1998;

* $3,200 on payment of entertainment expenses from July 1998 to February 1999;

* $250 on payment of educational expenses for his son;

* a further $15,000 (formerly on bank term deposit) on payment of living expenses up until June 1999.

He added that all the damages money has now been spent and he has virtually nothing in the bank.

22. The applicant told the Tribunal that the family's only income comprises about $500 per fortnight received by his partner by way of parenting payment and family allowance, and a further $400 - $500 per fortnight earned by his partner from her small cleaning business out of which she clears only about $20 per fortnight after payment of expenses for cleaning materials and petrol and other business expenses. He said that they were just able to manage to live on his partner's income, supplemented by regular loans (about $50 per week) from his parents.

23. The applicant told the Tribunal that his, and his partner's, major assets are their house (now valued at $155,000 and which is unencumbered), the "Range Rover" motor vehicle (now valued at $15,000 - $18,000), another motor vehicle (worth about $1,000), and furniture (worth about $10,000 - $15,000). He said that he owed debts to the Australian Taxation Office ($2,000) and to Biolab ($1,000) but that these were nearly paid off, but that he now owed his parents about $3,000 for the ongoing financial assistance they have been providing to him.

THE RESPONDENT'S EVIDENCE

24. In addition to the documentary exhibits (R1 - R7) originally tendered by the respondent, a letter dated 8 December 1999 was subsequently lodged with the Tribunal by Mr Ellis on behalf of the respondent. That letter (Exhibit R8) contained the following information:

* the "Module C - Compensation and damages" form (Exhibit R1), lodged with Centrelink on 29 September 1998, is attached to a "Parenting Payment - change of marital status BECOMING PARTNERED" form in the Centrelink file relating to the applicant's partner;

* there is no record of any claim by the applicant for Disability Support Pension ("DSP") prior to lodgment of the abovementioned "Module C" form, and no record of any claim by the applicant in the period July - August 1998;

* in January 1999 the applicant made a claim for Parenting Payment but, owing to the imposition of a preclusion period until July 2005, it was not proceeded with and the claim documents were destroyed;

* there is no record of the applicant ever having claimed DSP.

25. At a resumed hearing on 18 February 2000 Ms Jane Fisher gave oral evidence on behalf of the respondent. Ms Fisher told the Tribunal that she is an officer employed at the Joondalup office of Centrelink and that she had attended the applicant and his partner at that office on 15 January 1999. She said that the applicant's partner completed an Employment Declaration form and the applicant completed a Parenting Payment claim form. She added, however, that she then became aware of the applicant's preclusion period until July 2005 and it was decided to tear up the claim form because the claim could not be granted during the preclusion period. Ms Fisher confirmed that she then wrote a statement (T6 - see paragraph 17 above) on the applicant's behalf requesting a review of the decision to impose the preclusion period. She also confirmed that there had been no reference to DSP during that attendance on 15 January 1999. The applicant did not dispute Ms Fisher's evidence.

THE LEGISLATION

26. The relevant legislation is contained in Pt 3.14 (Compensation recovery) of the Social Security Act 1991 ("the Act") together with s17 (Compensation recovery definitions) of the Act.

27. Section 1165 of the Act provides for the imposition of a "preclusion period" during which various forms of social security, including DSP and Parenting Payment, are not payable to a person who has received a lump sum compensation payment. Under s17(2) of the Act, "compensation" includes any compensation or damages payment (whether in the form of a lump sum or periodic payments) that was made wholly or partly in respect of lost earnings or lost capacity to earn. Pursuant to s17(2B) of the Act, if the relevant compensation payment comprises more than one lump sum (as in the present case), the various lump sums are to be aggregated for the purposes of applying the "compensation recovery" provisions of the Act.

28. Section 1165 of the Act also provides for the calculation of the duration of the preclusion period and the date of its commencement. The duration of the preclusion period is calculated under a formula whereby, for the purposes of the present case, 50% of the total lump sum compensation payments ($150,000) is divided by the "income cut-out amount" ($412.70), resulting in a preclusion period of 363 weeks. The preclusion period commences, in a case (such as the present) where periodic compensation payments have been made, on the day after the end of the period of those periodic payments.

29. By reason of s1165 of the Act, therefore, the preclusion period in the applicant's case commenced on 11 July 1998 and its duration is 363 weeks, ending on 8 July 2005.

30. Section 1184(1) of the Act, however, confers a discretionary power to treat the whole or part of a compensation payment as not having been made if it is thought "appropriate to do so in the special circumstances of the case". The effect of treating part of the relevant compensation payment as not having been made is that the relevant preclusion period imposed pursuant to s1165 of the Act is correspondingly reduced, whereas the effect of treating the whole of the compensation payment as not having been made is that s1165 is rendered inapplicable and there is, therefore, no such preclusion period.

THE ISSUE

31. There is no dispute that the preclusion period from 11 July 1998 to 8 July 2005 which has been imposed on the applicant was correctly arrived at in accordance with ss17 and 1165 of the Act. The only issue is whether there are "special circumstances" in the applicant's case by reason of which it is appropriate to exercise the discretionary power conferred by s1184(1) of the Act to treat the whole or part of the relevant compensation payment as not having been made, thereby effectively extinguishing or reducing, respectively, that preclusion period.

CONSIDERATION OF ISSUE

32. The "special circumstances" discretionary power conferred by s1184(1) of the Act and its statutory predecessors has been considered in numerous decisions of the Federal Court and of the Tribunal. The tenor of those decisions is that, before it may become appropriate to exercise that discretionary power, the circumstances of the particular case must be special, in the sense of unusual, uncommon or exceptional, such that the application of the relevant "compensation recovery" provisions in Pt 3.14 of the Act will produce a result that is, in relation to the person concerned, unjust, unfair, unreasonable or otherwise inappropriate, having regard to the purpose or object of Pt 3.14 of the Act, namely, to ensure that a person is not entitled to receive both compensation payments and social security payments in relation to the same incapacity for work: see, for example Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61 at pp N96-N97; Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3; Secretary, Department of Social Security v Smith (1991) 30 FCR 56 at 58-63; Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 296-297.

33. In the present case the applicant submitted that the Tribunal should exercise the discretionary power conferred by s1184(1) of the Act having regard to the following matters:

* his general lack of comprehension or awareness of matters related to the settlement of his damages claim (including a social security preclusion period) in the period leading up to that settlement, owing to the effects of morphine on his mental faculties;

* Centrelink's failure to give him timely notice of the relevant preclusion period, as a result of which he had spent or committed most of the settlement amount before he became aware of the preclusion period; and

* his, and his family's, present financial circumstances.

34. As regards to the first abovementioned matter, although the Tribunal accepts the applicant's evidence that, in the period leading up to the settlement of his damages claim, he was under the influence of morphine and was thereby unable to comprehend that there would be a social security preclusion period imposed upon him by reason of his receiving a lump sum settlement amount, that in itself is not a special circumstance for the purposes of s1184 of the Act as explained in paragraph 32 above. If the applicant is dissatisfied with the way in which his solicitor dealt with him - in particular, the circumstances surrounding his signing the handwritten letter referred to in paragraph 20 above - that is a matter between him and his former solicitor. It is not in itself a special circumstance for the purposes of s1184(1) of the Act.

35. The second matter raised by the applicant was Centrelink's failure to give him timely notice about the preclusion period. The applicant's evidence was that he did not become aware of the imposition of the preclusion period until 15 January 1999 when he visited the local Centrelink office to apply for a pension and was so advised by an officer called "Jane". On the other hand, the documentary evidence before the Tribunal is that the applicant lodged with Centrelink a "Module C - Compensation and damages" form on 29 September 1998 notifying Centrelink of the amount and date of his compensation payment and that a letter dated 6 October 1998 was sent by Centrelink to the applicant containing detailed information, including the precise duration, of the preclusion period. On the same date a letter was sent by Centrelink to the applicant's solicitors referring generally to the provisions of Pt 3.14 of the Act. On the evidence before the Tribunal, Centrelink did not become aware of the applicant's receipt of a lump sum compensation payment until 29 September 1998 when the abovementioned "Module C" form was lodged by the applicant and, about 1 week later, Centrelink wrote to the applicant advising him of the preclusion period. In those circumstances it cannot be said that Centrelink was guilty of undue delay in notifying the applicant of the preclusion period. The Tribunal is prepared to accept the applicant's evidence that he does not remember receiving that letter but that, of course, is not evidence that the letter was not sent to him. The Tribunal finds, on the basis of the documentary evidence before it, that that letter was sent by Centrelink to the applicant and that it constituted prompt advice by Centrelink to him of the preclusion period. Having regard to that finding, the fact that, by that time, the applicant had spent or committed most of the settlement moneys - according to his evidence, about $200,000 out of a total amount of about $294,000 received by him - cannot be regarded as a special circumstance for the purposes of s1184(1) of the Act.

36. Finally, as regards the applicant's, and his family's, present financial circumstances, the Tribunal notes that, according to the applicant's own evidence, they are just able to manage to live on his partner's income, supplemented by regular small loans from his parents. As regards assets, they own a house (purchased with part of the settlement amount) which is worth about $155,000 and is not subject to a mortgage, together with a "Range Rover" motor vehicle and a substantial amount of furniture and effects. They have no substantial debts, apart from a debt of about $3,000 owed to the applicant's parents for the abovementioned regular small loans. In those circumstances it cannot reasonably be said that the applicant's, and his family's, financial circumstances are so dire as to warrant a compassionate exercise of the "special circumstances" discretionary power conferred by s1184(1) of the Act.

CONCLUSION

37. Accordingly, the Tribunal finds that there are no special circumstances in the applicant's case that make it appropriate to exercise the discretionary power conferred by s1184(1) of the Act.

38. The Tribunal notes in conclusion that the applicant's present difficulties are largely due to the fact that he did not give timely notice to Centrelink of his receipt of his lump sum compensation. Had he done so, or had he made a claim for a pension (such as DSP), in late July or early August 1998 shortly after receiving that compensation he would have presumably received advice from Centrelink at that time regarding the preclusion period which would have enabled him and his partner to make responsible financial plans for the duration of the preclusion period. The evidence before the Tribunal, however, is that the applicant did not inform Centrelink of his compensation payment until 29 September 1998, by which time he had spent or committed a large part of that compensation payment.

DECISION

39. For the above reasons the Tribunal affirms the decision under review.

I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor S D Hotop

Signed: S Railton

..............(sgd S Railton)................

Associate

Dates of Hearing 22 October 1999, 24 November 1999, 18 February 2000

Date of Decision 3 March 2000

Counsel for the Applicant In person

Solicitor for Applicant -

Counsel for the Respondent Mr S Ellis

Solicitor for the Respondent Advocacy and Administrative Law Team, Centrelink