Koneski and Secretary, Department of Family and Community Services [2000] AATA 96 (14 February 2000)

Last Updated: 13 March 2000

DECISION AND REASONS FOR DECISION [2000] AATA 96

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/1007

GENERAL ADMINISTRATIVE DIVISION )

Re VLADO KONESKI

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms S M Bullock, Member

Date 14 February 2000

Place Sydney

Decision The Tribunal sets aside the decision under review and substitutes its decision that an amount of $1500 in compensation be treated as not having been made pursuant to section 1184 of the Social Security Act 1991.

(Sgd) S M Bullock

..............................................

Member

CATCHWORDS

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

Social Security Act 1991 - ss17, 1165, 1184

Social Security Act 1947 - s 156

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

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

Director-General of Social Services v Hales (1983) 47 ALR 281

Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797

Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690

Re Millward and Secretary, Department of Social Security (AAT 6643, 28 November 1990)

Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990)

Commonwealth v Daniels (1994) 33 ALD 111

REASONS FOR DECISION

Ms S M Bullock, Member

1. This is an application for review made by Mr Vlado Koneski ("the Applicant") of a decision of the Social Security Appeals Tribunal ("the SSAT") (T2) made on 17 June 1999. The SSAT affirmed a decision of an Authorised Review Officer ("ARO") of the Department of Family and Community Services that there were no special circumstances pursuant to section 1184 of the Social Security Act 1991 ("the Act") to allow a part or the whole of a compensation lump sum to be disregarded (T25). The ARO's decision (made on 3 May 1999) affirmed the original decision of a delegate of the Secretary of the Department of Family and Community Services made on 23 February 1999 (T9) to impose a preclusion period of 36 weeks from 5 February 1999 to 14 October 1999 in respect of a lump sum compensation payment made to Mr Koneski of $30,275.00.

2. A hearing was held before the Administrative Appeals Tribunal ("the Tribunal") in Sydney on 21 October 1999. Mr Koneski attended the hearing and provided oral evidence. He was assisted by a Macedonian interpreter, Mr T Najdov. Mr Koneski was self-represented. The Respondent, the Secretary, Department of Family and Community Services ("the Department") was represented by Ms M Buckley, Departmental Advocate. The Tribunal admitted into evidence documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 and the following exhibits:

Exhibit No A1 A2 A3 R1 R2 R3 R4 Description Letter to Ms B J Pullinger, Barrister-at-Law, from Ms R Hickie, Solicitor Letter to Mr V Koneski from Ms B Pullinger, Barrister-at-Law, with attachment Short Minutes of Order Matter No 72 of 1999 in the Compensation Court of NSW Respondent's Statement of Facts and Contentions Departmental computer print-out in relation to Departmental payment history for Mr Koneski for: 1992/93 1993/94 1994/95 1995/96 1996/97 Disability Support Pension payment history for Mr Koneski 5 Oct 1999 - 18 Oct 1999 Medical assessment in relation to Mr Koneski by Dr J Ying, Medical Adviser, Health Services Australia Date 10 December 1998 22 December 1998 5 February 1999 12 October 1999 11 October 1999 20 October 1999 3 September 1999

ISSUES

3. The issues to be determined in this matter are:

* Whether Mr Koneski is precluded from receiving Social Security benefits from 5 February 1999 to 14 October 1999 due to the receipt of a lump sum compensation settlement; and

* if so, whether there are any special circumstances present which would allow for a part or the whole of the compensation to be treated as not having been made under section 1184 of the Social Security Act 1991.

LEGISLATION

4. A determination in this matter requires consideration of the provisions of the Social Security Act 1991 ("the Act").

5. Section 17 of the Act deals with compensation payments, and specifically, subsection 17(2) states:

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

(a) a payment of damages; or

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

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

(d) any other compensation or damages payment;

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

(e) made wholly or partly in respect of lost earnings or lost capacity to earn; and

(f) made either within or outside Australia.

Note: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law."

6. Subsection 17(3) of the Act provides that the compensation part of a lump sum compensation payment is, in relation to matters settled after 9 February 1998, 50% of a payment made in settlement of a claim related to disease or injury and, as relevant, states:

"17(3) For the purposes of this Act, the 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, on or after 9 February 1988; 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, on or after 9 February 1988; 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."

7. Subsection 1165(1A) of the Act provides that recipients of a lump sum compensation payment are not entitled to compensation affected payments for certain periods:

"1165(1A) If:

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

(b) the person is not a member of a couple; and

(c) the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;

no compensation affected payment is payable to the person for the new lump sum preclusion period.

Note 1: For see subsections (5) to (8).

Note 2: A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B)."

8. Depending on the circumstances of the particular case, the lump sum preclusion period is ascertained by utilising provisions of subsections 1165(5) to (8) of the Act. Subsection 1165(5) states:

"1165(5) If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the is the period that:

(a) begins on the day after the last day of the periodic payment period; and

(b) ends after the number of weeks worked out under subsections (8) and (9).

Note: For see section 17."

9. Subsections 1165(8) and (9)state:

"1165(8) If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:

Compensation part of lump sum

Income cut-out amount

Note 1: For , see section 17.

Note 2: For , see section 17."

1165(9) If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number."

10. Section 1184 of the Act allows for part of a whole payment of compensation to be disregarded in special circumstances and states:

"1184(1) For the purposes of this Part, the Secretary may treat the whole or part of a 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.

1184(2) If:

(a) a compensation affected payment; and

(b) the receives compensation; and

(c) the set of circumstances giving rise to 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).

Note: payments and not wages."

BACKGROUND

11. The following information is provided by way of background and the facts contained herein are not in dispute:

* Mr Koneski was born on 5 April 1960 in Macedonia in the village of Topolcani. He attended High School until he was approximately 17 years of age.

* Upon leaving school, Mr Koneski worked on the family farm.

* Mr Koneski migrated alone to Australia on 13 May 1992 (Exhibit R3). He had a sister already living in Australia at that time.

* Beginning in around June 1992, Mr Koneski worked for a period of approximately eight months in a Coco Cola factory in Brisbane.

* Mr Koneski has received Departmental benefits intermittently since 1993.

* In June 1997, Mr Koneski was in receipt of a Newstart Allowance at the rate of $396.30 per fortnight (Exhibit R2).

* On or about 20 June 1997, Mr Koneski commenced employment in a hotel as a room attendant, making beds, cleaning rooms and the like.

* On 29 June 1997, while carrying some blankets down a flight of stairs in the hotel, Mr Koneski injured his back.

* Mr Koneski received compensation payments until March 1999 (T5).

* On 19 February 1999, the Department was advised by HIH Workers Compensation (NSW) Pty Limited, that Mr Koneski's workers' compensation matter settled on 5 February 1999 for $30,275.00 (T5).

* On 23 February 1999, a delegate of the Department notified Mr Koneski that a preclusion period would be imposed from 5 February 1999 to 14 October 1999, precluding Mr Koneski from receiving any Departmental benefits (T9).

* On 9 March 1999, $26,103.72 was deposited in Mr Koneski's bank account (T13).

* On 24 March 1999, Mr Koneski requested an internal departmental review of the delegate's decision to impose a preclusion period, writing that he had been on compensation for 20 months and had received a settlement of $26,000.00. Further, Mr Koneski wrote that he had to repay some of that money to friends and relatives (T10).

* The internal review was completed and by letter of 7 April 1999, Ms Z Tsembelis, Team Leader of the Compensation and Recoveries Section of Centrelink, informed the Applicant that the original decision to impose a preclusion period was correct (T20).

* Mr Koneski sought a review by an ARO which was duly undertaken and a decision made on 3 May 1999 to affirm the determination of the original decision-maker (T25).

* On 11 May 1999, Mr Koneski applied to the SSAT for a review of the decision of the ARO in the following terms:

"As I have spent the lump sum on debts incurred during the decision process of the case.

Now I have no spending money for bare survival." (T29)

* On 17 June 1999, the SSAT affirmed the decision of the ARO, concluding that the preclusion period had been appropriate and correctly calculated. The SSAT also concluded that there were no special circumstances in Mr Koneski's case to warrant an exercise of the discretion contained in section 1184 of the Act to allow for a part or the whole of a compensation payment to be disregarded.

* On 2 July 1999, Mr Koneski submitted an application for review of the SSAT's decision to the Tribunal (T1).

* Mr Koneski applied to the Tribunal for a stay of the SSAT's decision and on 28 July 1999, a stay of the SSAT's decision was granted by the Tribunal.

* On 30 July 1999, Mr Koneski lodged a claim for Newstart Allowance and was paid Newstart Allowance.

* On 16 September 1999, Mr Koneski was granted a Disability Support Pension effective from 28 July 1999.

EVIDENCE OF MR KONESKI

12. Mr Koneski told the Tribunal that he had injured his lower back and right leg while employed as a house boy in a hotel. Prior to this, Mr Koneski had for the most part been in receipt of a Newstart Allowance or Departmental payments for the period 1993 to mid 1997. Mr Koneski stated that during this period he was never in debt. Mr Koneski informed the Tribunal that he understood that when he was on a Newstart Allowance, he could not also be employed and in receipt of additional money. Mr Koneski told the Tribunal that he knew and understood that he could not receive Departmental benefits in addition to wages; put in other words, he appreciated that he could not be paid from two sources during the same period.

13. Mr Koneski received Departmental benefits prior to his work injury, (which occurred on 29 June 1997), ranging from approximately $335.00 per fortnight in 1993 to $396.00 per fortnight in 1997.

14. Following his accident, Mr Koneski received workers' compensation payments for the first 26 weeks at $820.00 per fortnight and which were then reduced to $540.00 per fortnight. Mr Koneski told the Tribunal that he could not manage financially when his compensation payments reduced and was forced to borrow money from three friends. Accordingly, Mr Koneski detailed his borrowings from mid 1997 to February 1999 as:

1. $5,000.00 from Slavica Jankuloska, repaid by Mr Koneski on 15 March 1999 (T14)

2. $10,000.00 from Boris Cvetkovski, between July 1997 and February 1999, repaid by Mr Koneski in full on 11 March 1999 (T15)

3. $8,000.00 from Boris Tasevski, during 1998 and repaid by Mr Koneski in full on 12 March 1999 (T16)

15. Mr Koneski stated that during August and September 1998, his health was deteriorating and he needed to expend his finances on providing for his care, which included the purchase of prepared meals (as he was unable to cook), and clothing and expenses relating to rent, medical reports, physiotherapy and having his laundry done. When asked by the Tribunal what his level of expenditure was on these particular requirements, Mr Koneski noted that it was impossible to calculate what his needs and expenses were. Mr Koneski stated, however, that during late 1998, when his compensation payments had been reduced, he had more costs and outgoings than he had income. Mr Koneski stated that his financial situation was so "stretched" that in addition to borrowing considerable amounts of money from his friends, he also required the assistance of the Salvation Army.

16. In relation to his borrowings, Mr Koneski told the Tribunal that he always knew, and it was a condition of his receiving money from his friends, that he would have to repay those funds; he in fact repaid these debts once his compensation settlement came through. Mr Koneski told the Tribunal that he did not use any part of the money borrowed from his friends to purchase a motor vehicle.

17. As a result of his work injury, Mr Koneski engaged the services of a solicitor and barrister to conduct his workers' compensation case which ultimately settled for $30,275.00. Mr Koneski told the Tribunal that he had believed that his workers' compensation settlement would be greater but acknowledged that he agreed with the settlement and had given authority to accept the settlement (Exhibit A2).

18. Mr Koneski denied having any knowledge of the imposition of a preclusion period until he received a letter from Centrelink on 23 February 1999, announcing that he was precluded from receiving Departmental benefits from 5 February 1999 to 14 October 1999 (T9). Mr Koneski told the Tribunal that this letter was translated to him by a friend and he understood its meaning. Mr Koneski stated that neither his solicitor or barrister had ever discussed with him the possibility and implications of a preclusion period. Mr Koneski informed the Tribunal that if he had known that a preclusion period was to be imposed, he would not have accepted the $30,275.00 in settlement as he considered this would be inadequate given that he had to repay loans to his friends and also support himself for the period between February and October 1999.

19. While Mr Koneski's compensation settlement was for an amount of $30,275.00, he ultimately received approximately $26,000.00. Mr Koneski informed the Tribunal that in about April 1999, he also received a Medicare rebate of approximately $3,000.00. As the Tribunal understood Mr Koneski's evidence, he stated that he also received back payment of compensation in March 1999 of approximately $1,000.00.

20. From the funds Mr Koneski received from his compensation settlement he stated that in addition to repaying $23,000.00 to his friends, he purchased a motor vehicle for approximately $3,500.00. Mr Koneski told the Tribunal that it was essential he have a car as he could not walk more than 20 metres. He constantly experienced back and leg pain and a motor vehicle was the means by which he could transport himself to medical appointments. Mr Koneski stated that the car was purchased in about March 1999 and reiterated that he had not used the funds borrowed from his friends to purchase the car.

21. In a statement of 30 March 1999, detailing assets and expenses, Mr Koneski noted that in addition to his car (worth $3,500.00), he owned $1,600.00 worth of clothing and that from his compensation money he had in fact purchased clothes to the value of $1,000.00. At that time in March 1999, Mr Koneski further noted that his financial commitments extended to outstanding accounts to Energy Australia for $125.00, back payment of rent to R R Real Estate to the value of $1,620.00, an account for $150.00 from Dr Oreb and an account from the NRMA Third Party Insurance in the amount of $263.00 (T18). Mr Koneski also listed his weekly living expenses as at 30 March 1999 as follows (T18):

"Weekly Expenses

1. $135 Weekly rent

2. $150 Weekly food

3. $15 laundry

4. $15 electricity

5. $30 clothing

6. $45 car expenses

TOTAL $390"

22. Mr Koneski told the Tribunal that his health had deteriorated to the point where he had applied for a Disability Support Pension which was subsequently granted on 16 September 1999, effective from 28 July 1999. Mr Koneski believed that his Disability Support Pension was granted because of his back condition and also due to psychological problems. Currently, Mr Koneski's medication consists of Naprosyn from time to time, and Brufen in addition to Panadeine Forte for his back and leg pain. Mr Koneski has also been prescribed Ducene tablets for his psychological problems which he described as manifesting themselves by "nerves, poor sleeping and memory loss". Mr Koneski told the Tribunal that he attends a psychiatrist, Dr Kecmanovic, once or twice per month and also his general practitioner, Dr Oreb, is consulted regularly.

23. Currently, Mr Koneski lives alone and pays $130.00 per week in rent. At the date of hearing, Mr Koneski was receiving $447.90 per fortnight from his Disability Support Pension. In recent times, because of financial difficulties, Mr Koneski has also had to borrow $2,800.00 from one of his friends.

24. The Tribunal discussed with Mr Koneski his ability to cope financially (and otherwise) should the Tribunal decide to affirm the SSAT's decision. The implication of such a decision would not only enforce the preclusion period but also require Mr Koneski to repay to the Commonwealth the amount of Disability Support Pension which he has received during the preclusion period because of his successful stay application. Mr Koneski stated that if he were required to repay the $2,663.00 owing to the Department and arising out of payment of Disability Support Pension made during the preclusion period, then he would have to sell his car. This would be "catastrophic", Mr Koneski stated, because his car is his only means of transport. Mr Koneski told the Tribunal that he has no other income apart from his Disability Support Pension and does not receive any financial assistance from his sister with whom he does not enjoy a good relationship. Mr Koneski has no other major assets apart from his car. Mr Koneski has additional expenses because he is physically unable to do his own laundry, nor much of his cooking, although he does have a friend cook for him from time to time. Mr Koneski stated that he lives a frugal lifestyle and does not gamble or consume alcohol. Having stated this, Mr Koneski told the Tribunal that he has no other problems which could be considered special.

25. At the conclusion of his evidence, Mr Koneski indicated that he may have some other documentary evidence in support of his application for review to the Tribunal. Accordingly, and with no objection from the Respondent, the Tribunal provided Mr Koneski with additional time following the hearing, in which to forward any further documentary evidence. It was later ascertained by the Tribunal Registry that Mr Koneski could not locate any additional documentary material and, accordingly, the Tribunal proceeded to make its decision.

SUBMISSIONS

26. Mr Koneski submitted that he was extremely disappointed and disadvantaged because he had not been notified of the existence of a preclusion period, let alone informed of the implication of such a preclusion period, until after he had accepted a workers' compensation settlement. Mr Koneski contended that because he had not been advised by his solicitor or barrister of the preclusion period, he had made a decision about the settlement which ultimately greatly disadvantaged him financially.

27. Because Mr Koneski had borrowed money from his friends when his workers' compensation payments were reduced, he was in debt at the time of his compensation settlement. This debt situation had not greatly worried Mr Koneski at the time because he believed that the compensation settlement amount would more than meet his loan repayments. He had not included in his calculations the existence of a preclusion period with the effect of preventing him from obtaining income support following the repayment of his debts from his workers' compensation settlement. Mr Koneski submitted that he had no choice but to repay the creditors, despite him having tried to either reduce or delay such repayment. Mr Koneski submitted he was ill advised by his lawyers and severely disadvantaged.

28. Mr Koneski concluded that to affirm the SSAT's decision would cause him great stress, financial difficulties and the loss of his car, his only means of transport. He would have to rely on further charitable assistance.

29. Ms Buckley, for the Respondent, submitted that there is no dispute between the Respondent and Mr Koneski as to the calculation of the actual preclusion period and that the 36 week period arrived at by the Department had correctly applied the legislative formula contained in section 1165 of the Act.

30. The central issue of special circumstances as provided in section 1184 of the Act was discussed by Ms Buckley. Referring to Re Beadle and Director-General of Social Security (1984) 6 ALD 1, Ms Buckley submitted that the Tribunal should be guided by the comments of Toohey J in that decision when he concluded:

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

Ms Buckley contended that there are no special circumstances in Mr Koneski's case which could be defined as "unusual, uncommon or exceptional".

31. Although Mr Koneski believes he was not properly advised of the preclusion period by his legal advisers, Ms Buckley submitted that there was no objective evidence to support this view. While Mr Koneski further submitted that he spent funds and borrowed money in expectation of receiving a larger compensation payment, because he was not notified of the rules regarding compensation preclusion periods, the fact is, Ms Buckley submitted, that inadequacy of legal advice has not been regarded as a special circumstance per se in a number of Tribunal decisions. Referring to Re Millward and Secretary, Department of Social Security (AAT 6643, 28 November 1990), Ms Buckley noted that the Tribunal found that ultimately there were special circumstances in that case but indicated that incorrect legal advice may not of itself be sufficient. In that decision, the Tribunal noted:

"... The failure by the solicitor and the departmental officer to warn him of the rule is of more significance as advising on such matters in the circumstances the applicant has described would be considered as part of their role by persons in the applicant's position. Their silence in those circumstances really amounts to inadequate professional advice of a similar nature to wrong legal advice which was considered in relation to special circumstances in Krzywack. That case was actually decided on the existence of other special circumstances and whether wrong legal advice could, by itself, amount to special circumstances was not determined. Similarly in this case there are other circumstances to be considered in addition to this aspect of inadequate professional advice. ..."

The factual content relevant to the Applicant in Re Millward (supra) is, so Mr Buckley contended, distinguishable from the case presently before the Tribunal. Mr Koneski made no attempt to enquire about his continued eligibility for Departmental benefits and further, in Re Millward (supra) there was a range of other circumstances that were found to be "special", including Mr Millward's and his wife's severely deteriorating health and financial hardship. Ms Buckley contended that none of those factors are relevant in Mr Koneski's case.

32. In Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990), the Tribunal stated:

"The fact that at the time of his compensation award the Respondent thought that he could get a benefit is also not a special circumstance. Nor is wrongful advice from a solicitor. The Tribunal in Re Bolton (supra) referred to this latter situation, saying at para 24, 'No doubt if the present respondent had been properly advised as to his potential preclusion from receiving a pension for some years he may not have gone ahead with buying and renovating the property ... Overall, this factor is not persuasive or determinative and the best view is that the matter is one, if at all, as between solicitor and client'."

33. Mr Koneski has alleged that his legal advisers led him to believe he would be entitled to an amount much larger than he actually received in compensation. This poor advice caused him to borrow from his friends an amount of $23,000 which he believed he would have no difficulty repaying once in receipt of his settlement. Ms Buckley submitted that there is no evidence which could allow the Tribunal to find that this was a "special circumstance". In this regard, Ms Buckley contended that there is no evidence of the amount of compensation which Mr Koneski expected to receive nor of the date on which any such advice was given. Further, Ms Buckley submitted that there is also no evidence to prove that the debts incurred by Mr Koneski arose because of poor legal advice.

34. Ms Buckley submitted that whether or not the Applicant received poor legal advice, Mr Koneski was nevertheless "naive and careless" in respect of his obligations to support himself. Ms Buckley noted that Mr Koneski was in receipt of compensation at a rate higher than the normal Newstart Allowance, yet still incurred substantial debts. Mr Koneski sought no advice from the Department in relation to compensation payments and he appears not to have sought any direct advice from his legal advisers in relation to his obligation to support himself from the compensation money. Accordingly, Ms Buckley concluded that Mr Koneski's naive and careless actions could not be considered a special or unusual circumstance.

35. In relation to Mr Koneski's financial situation and possible hardship, Ms Buckley submitted that financial hardship alone is not sufficient to constitute a "special circumstance". In order for financial hardship to be a "special circumstance" under the Act, Ms Buckley submitted that the financial circumstances must be more than "straightened". They must be exceptional as was noted in Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985).

36. Ms Buckley referred the Tribunal to Director-General of Social Services v Hales (1983) 47 ALR 281 in which Sheppard J of the Full Federal Court noted at p321:

"...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."

Ms Buckley also referred the Tribunal to Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797. In that case the Tribunal noted Mr Groth's need to maintain financial vigilance and also noted the poor health of both Mr and Mrs Groth. Nevertheless, the Tribunal concluded that even allowing for these arduous conditions, they were not "special circumstances" when viewed in the light of similar fact situations and when considered alongside the objects of the Act.

37. Ms Buckley urged the Tribunal to have regard to the fact that the financial hardship experienced by Mr Koneski was largely self-inflicted and more generally to Mr Koneski's role in causing his own difficulties. Referring to Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690, Ms Buckley noted that Senior Member Dwyer in that decision examined the circumstances out of which the hardship in Mr Krzywak's circumstances arose and that the degree of hardship in that case was relevant to deciding whether and how the discretion under section 156 of the Social Security Act 1947 should be exercised. In Mr Koneski's case, Ms Buckley submitted that despite having received notice of the compensation preclusion period, Mr Koneski did not then proceed to make provision for his future. His careless conduct therefore could not be considered to be special. Noting Mr Koneski's evidence to the SSAT to the effect that in the period from June 1997 to March 1999 he was in receipt of $270.00 per week in compensation, Ms Buckley submitted that this amount was approximately $140.00 per fortnight greater than he had previously received on Newstart Allowance when Mr Koneski was paid at the rate of $396.30 per fortnight or $198.15 per week. Despite having at his disposal an amount greater than any single beneficiary, Mr Koneski still needed to borrow $23,000 from friends in a 20 month period. Ms Buckley submitted that when the compensation settlement was made to Mr Koneski in March 1999, he chose to repay those personal debts, rather than deciding to provide for his financial support for the period from February to October 1999. In respect of the lump sum compensation payment of $26,106.00, Mr Koneski utilised $23,000.00 for the repayment of his personal debts. This meant that an amount of $3,106.00 was left for Mr Koneski to support himself. Ms Buckley noted that the SSAT found that a further $3,000.00 was refunded to Mr Koneski by Medicare in about March or April 1999 (T2 p12).

38. Ms Buckley contended that Mr Koneski knew of the compensation preclusion period at the time he chose to spend his settlement monies on repayment of debts. Even after the debts had been repaid, Ms Buckley submitted that Mr Koneski should have been more than able to support himself for some time. As noted by the SSAT, Ms Buckley submitted that Mr Koneski chose to purchase a car. This action clearly demonstrated that Mr Koneski was unreasonably spending money which ought to have been used to support himself during the preclusion period. Ms Buckley concluded that act clearly demonstrated his lack of concern for his obligations.

39. Ms Buckley submitted that the level of financial hardship suffered by Mr Koneski was entirely foreseeable and arose as a result of his own recklessnes. If the Tribunal considered Mr Koneski's financial hardship as special in these circumstances, Ms Buckley submitted that this would send a very clear message to other applicants that the compensation legislation can be easily avoided by rapidly putting oneself into difficult financial circumstances. Ms Buckley encouraged the Tribunal to follow the reasoning in Re Colaiacolo (supra). In that matter the Tribunal considered that the exercise of a legislative discretion should not frustrate the scope and purposes of the Act. Further, the Tribunal in that matter considered that the course of action undertaken by the Applicant to use monies to repay debts may be understandable, but it was not sufficient reason to regard such debts as having priority over his obligation to support himself. This was particularly the case as the Applicant in that case had regarded debts as having priority over what his solicitors had been warned was a liability to the Commonwealth.

40. Considering Mr Koneski's current financial circumstances, Ms Buckley submitted that the Applicant could not be said to be experiencing severe financial hardship. Mr Koneski is in receipt of a Disability Support Pension of $447.90 per fortnight (including allowances for rent assistance and pharmaceuticals) and this places him on the same footing as other Social Security recipients. Any continuing financial hardship which Mr Koneski finds himself in, is as a result of what appears to be a repeated pattern of expenditure beyond his financial means, so Ms Buckley submitted, and this situation could not be considered as "special".

41. As at 14 October 1999, Ms Buckley noted that Mr Koneski had served his preclusion period and therefore would not suffer any ongoing financial hardship if the Tribunal affirmed the decision under review. However, due to the effect of the Tribunal's Stay Order and Mr Koneski's subsequent receipt of Departmental benefits from 28 July 1999, Mr Koneski would be in a position of having a debt of approximately $2,663.00 owing to the Department. This debt would be repayable by withholdings from Mr Koneski's Disability Support Pension. This, Ms Buckley submitted, is not an unusual position but rather one that unfortunately many recipients find themselves in. Further, Mr Koneski was fully aware of the implications of seeking the Stay Order and therefore any resulting debts could not be considered to be unforeseen or in any way special. Ms Buckley concluded that Mr Koneski's financial circumstances are in no way unusual or uncommon and therefore did not constitute a special circumstance.

42. In relation to Mr Koneski's health, Ms Buckley submitted that he receives no ongoing treatment. He receives a Disability Support Pension which also includes a health card, pharmaceutical allowance and rental assistance. Therefore, while his health difficulties are acknowledged and unfortunate, they cannot be considered special.

43. In reaching a determination in this matter, Ms Buckley asked the Tribunal to consider the intention of the legislation. In this regard, Ms Buckley contended that if all or a part of the compensation was disregarded then this would frustrate the intention of the Act. Referring to Re Groth (supra) it should be noted that in that matter the Tribunal concluded at p798:

"... It seems to me that the purpose of the provisions [of part 3.14] is to ensure that a person is not paid from two sources in respect of the same period of time. ... Therefore, there will be special circumstances if the circumstances are such that it is unreasonable, unjust or inappropriate not to treat the whole or part of a compensation payment as not having been made bearing in mind that the provisions are intended to ensure that a person is not paid from two sources in respect of the same period of time."

Ms Buckley submitted that throughout the period of the compensation payment, Mr Koneski was in a much better position than other recipients of income support. It would be unfair to those other recipients of compensation who live within their means and make provisions for their future, to allow a person such as Mr Koneski to benefit from his financial recklessness by disregarding any of these compensation payments. As Ms Buckley had submitted previously, for the Tribunal to do so would send a clear message that all that is required of a compensation recipient is to spend his or her funds as quickly as possible and then let the Government bear the ensuring financial burden. This, Ms Buckley submitted, would be unreasonable and inappropriate.

44. In conclusion, Ms Buckley contended that Mr Koneski's conduct, after having been given notice of a compensation preclusion period, suggested a "complete lack of concern" for the relevant legislative provisions and the underlying intent of those provisions. Ms Buckley further contended that the legislation is clear and that the public purse ought not to be used to support Mr Koneski's gross disregard for his obligations to support himself from the proceeds of the compensation payment. Accordingly, Ms Buckley submitted that Mr Koneski had a compensation preclusion period correctly imposed from 5 February 1999 to 14 October 1999 and that there were no special circumstances arising out of his health, financial circumstances or inappropriate or inadequate legal advice which could properly be considered special. Accordingly, as there were no special circumstances in Mr Koneski's case, the discretion contained in section 1184 of the Act could not be activated. Therefore, Ms Buckley submitted, on behalf of the Respondent, that the decision of the SSAT of 17 June 1999 should be affirmed as the correct and preferable decision.

FINDINGS

45. The Tribunal has reached its decision in this matter, taking into account the oral and documentary evidence, the legislation, case law and submissions.

46. Mr Koneski was cooperative in the provision of his evidence although at times found it difficult to recall specific details of his expenditure following the receipt of his lump sum compensation and of its timing.

47. The first issue for the Tribunal to determine is whether or not a preclusion period was correctly imposed and if so, for the correct period. While Mr Koneski was disappointed with and disapproved of the imposition of a preclusion period, he has not disputed the general principle that Social Security recipients cannot receive money from two sources, namely Social Security benefits and compensation for the same period. Indeed, Mr Koneski acknowledged that when he was initially in receipt of Newstart Allowance he was not able during that same period to be employed and receive income from wages. Mr Koneski also has not disputed the length of the preclusion period. Having considered the details of the compensation settlement and applying the relevant formula from section 1165 of the Act, the Tribunal finds that the preclusion period was correctly applied in Mr Koneski's circumstances and that the calculation of this period of 36 weeks from 5 February 1999 to 14 October 1999 was also correct.

48. The issue remaining for determination is whether or not there are any special circumstances in this case which would warrant the enactment of the provisions contained in section 1184 of the Act to allow for a part or the whole of the compensation paid to Mr Koneski to be disregarded.

49. Ms Buckley referred the Tribunal to a number of authorities in which various tribunals and courts have considered the exercise of the discretion contained in section 1184 of the Act. The Tribunal considers that it is to the particular circumstances in each case that a decision-maker must turn his or her careful attention and in this regard the Tribunal adopts the approach of Neaves J in Commonwealth v Daniels (1994) 33 ALD 111 in which, when considering section 156 of the 1947 Act, the precursor to section 1184 of the Act, it was noted at p119 (per Neaver J):

"... It has been accepted that the language of s 156 is such as to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case. The discretion may be exercised in favour of an applicant for a pension where the special circumstances of the particular case demonstrate that the strict enforcement of other provisions of Pt XVII of the Act would be unjust, unreasonable or otherwise inappropriate."

In this case, the Tribunal considers that the exercise of the discretion contained in section 1184 of the Act must involve the evaluation of a combination of factors, taking into account any unusual or exceptional circumstances. Thus, in Mr Koneski's case, the Tribunal has considered his circumstances including not only his financial situation but also the circumstances of his health and the issue of legal advice provided to him during his workers' compensation case.

50. Mr Koneski stated that he was not advised by his legal advisers, nor anyone else, of the likelihood of a preclusion period being imposed or of the implication thereof, before he accepted the settlement of $30,275.00. Mr Koneski stated that he did not have an interpreter present at the time he agreed to the settlement. If he had known of a preclusion period, Mr Koneski submitted that he would not have accepted the settlement amount. Mr Koneski stated that he had expected a larger settlement. During the period leading up to the settlement on 5 February 1999, Mr Koneski had been unable to live on the weekly compensation payments of $270.00 which was $140.00 in excess of the Departmental benefit he might ordinarily have received. As a consequence, Mr Koneski had borrowed money from friends on the condition that these loans be repaid upon settlement. All of these loan arrangements and the level of his expenditure prior to settlement occurred before Mr Koneski became aware of a preclusion period. While Ms Buckley submitted that Mr Koneski knew of the preclusion period on 23 February 1999, a proposition which Mr Koneski has not denied, Mr Koneski's point was that he became aware of the preclusion period after he had agreed to the settlement and after he had arranged to repay loans to his friends. While Mr Koneski knew of the preclusion period when his settlement funds of some $26,000.000 were deposited in his bank on 9 March 1999 (T13), this does not negate Mr Koneski's argument that by that time, it was too late for him to negotiate further on a higher settlement amount as he had already accepted it and there also was no opportunity for him to retract his agreement to repay his debts.

51. The Tribunal has no objective evidence as to whether Mr Koneski received legal or other advice to the effect that a preclusion period would be imposed. The Tribunal has before it Mr Koneski's evidence that he was not advised by his legal advisers of the preclusion period and that at the time of settlement there was no interpreter present. Mr Koneski has furnished the Tribunal with statements from debtors that he borrowed money in 1998 and that there was a very clear expectation of repayment.

52. Mr Koneski has not pursued any legal action against his legal advisers, though the Tribunal has some doubts as to whether or not this is a realistic option available to Mr Koneski. The Tribunal has some difficulty making any findings in relation to the provision of legal advice having regard to the fact that Mr Koneski's legal advisers did not give evidence before the Tribunal. However, it may have been that Mr Koneski was not advised, was poorly advised or that he did not fully understand the advice provided to him. Whatever the circumstances, the Tribunal does not doubt Mr Koneski's genuine belief that he was unaware of the imposition of a preclusion period (or the implications thereof) at the time he agreed to the settlement. Considering Mr Koneski's contention that had he been aware of the preclusion period he would not have accepted the settlement of $30,275.00 but would have tried to obtain a higher settlement, the Tribunal notes that Mr Koneski's legal advisers had attempted to obtain a higher settlement amount of $50,000.00 on 10 December 1998 (Exhibit A1). A counter offer was made by the legal representatives for HIH Workers Compensation (NSW) Pty Limited in the sum of $20,000.00, which Mr Koneski rejected, finally settling on the settlement lump sum of $30,275.00. Given these facts, the Tribunal is thus of the opinion that any poor or inadequate legal advice provided to Mr Koneski would not in all probability have impacted on the final aggregate settlement amount. Considering the authorities and Mr Koneski's circumstances, the Tribunal does not consider that the inadequacy of legal advice could be considered a special circumstance in this matter.

53. The Tribunal next considered Mr Koneski's financial circumstances. Mr Koneski's evidence was that he was not in debt when he was in receipt of Departmental benefits between 1993 and 1997 but became in debt when his weekly compensation payments reduced from $840.00 per fortnight to $540.00 per fortnight. The lesser weekly compensation payments, however, were still greater than any income security he might have obtained from the Department. Mr Koneski's argument was that he could not meet all his medical/ health associated costs particularly during the latter period of 1998, and which costs included (inter alia) physiotherapy, food and laundry. Because of the nature of Mr Koneski's back condition, he was unable to cook for himself or carry out many domestic activities such as laundry. Mr Koneski stated that he had to borrow money to meet these additional expenses but had done so believing that he would have no difficulties repaying his debts from his settlement. He had expended funds in the belief that his settlement would cover his debts and living expenses and these actions were undertaken in the absence of any knowledge of the imposition of a preclusion period. The Tribunal has already found that Mr Koneski genuinely was unaware that there would be a preclusion period at the time he accepted the settlement.

54. When Mr Koneski became aware of the preclusion period, he had already accepted a settlement which, when he repaid his debts, was clearly going to cause him severe financial difficulties in supporting himself between 5 February 1999 and 14 October 1999. As the Tribunal considered Mr Koneski's evidence, he received a further $3,000.00 from Medicare in addition to a further $1,000.00 in March 1999, which Mr Koneski characterised as a back payment. Despite knowledge of his very constrained financial situation, Mr Koneski purchased a motor vehicle for $3,500.00 and repaid all of his debts.

55. The Tribunal considers, given Mr Koneski's disabilities, that the purchase of a car was necessary as an aid to enhancing his mobility. The car was not an extravagant purchase but a necessary one. In relation to the repayment of debts, the Tribunal considered whether or not this action was prudent. Mr Koneski stated, and the Tribunal accepts, that he attempted to renegotiate the repayment of debts but that the creditors were inflexible in pressing their claim for repayment of the loans they had provided to him. The Tribunal also accepts that Mr Koneski attempted to clarify the issue relating to the preclusion period with the Department immediately he became aware of it. While the Tribunal accepts that Mr Koneski had made the arrangements to accept loans and repay the consequent debts upon settlement before he became aware of the imposition of a preclusion period, it still remains the reality that Mr Koneski had to provide for his own support for a period between February and October 1999. While the Tribunal does not accept the Respondent's submission that Mr Koneski's repayment of the debts was reckless, it considers that Mr Koneski may have been able to organise to repay lesser amounts to the creditors so that he would have had more adequate funds available for his support during the preclusion period.

56. Currently, Mr Koneski is in receipt of a Disability Support Pension and is receiving approximately $247.00 per fortnight. He will be required to pay $2,663.00 if the Tribunal affirms the decision of the SSAT to press the presence of a preclusion period. Mr Koneski has no assets apart from his car, which the Tribunal has already found is a necessary aid to his mobility, given his health. The Tribunal considers that while Mr Koneski has perhaps not acted prudently in relation to the expenditure of his settlement funds, he is ill equipped in his current circumstances to deal with an imposition of further financial hardship. To impose financial burdens on a person who is in receipt of a Disability Support Pension for his back condition and a depressive condition would be to impose, in the Tribunal's view, an unacceptable level of hardship. The Tribunal distinguishes Mr Koneski's circumstances from those operating in Re Groth (supra) and Re Colaiacolo (supra) where both of those applicants had other assets available to them. Mr Koneski has also been required to borrow further funds since the settlement in order to make ends meet. Therefore, the Tribunal finds Mr Koneski's financial situation is tight and the imposition of the preclusion period with all its consequences following the stay application, would impose an extreme financial burden. This does not detract from the Tribunal's view that Mr Koneski is partly responsible for his own financial difficulties and that he has engaged in poor financial management.

57. The Tribunal next considered Mr Koneski's health. Mr Koneski has been granted a Disability Support Pension because of his back condition (rated at 20 points under the Impairment Tables contained in Schedule 1B of the Act) and also a psychiatric condition of depression (rated at 10) which is characterised by low moods, impaired sleep, poor appetite, loss of concentration and which requires psychiatric treatment and medication as reported by Dr J Ying, Medical Adviser to Health Service Australia (Exhibit R4). Mr Koneski has severe pain in his back and leg and restricted mobility. The Tribunal has already found that Mr Koneski requires a car to assist in his mobility and there has been no evidence provided by the Respondent to contest this.

58. Accordingly, the Tribunal finds that when viewed collectively, special circumstances do exist in Mr Koneski's case, and in particular the combined effect of the Applicant's precarious financial situation should the preclusion period be enforced and the instability of Mr Koneski's health. The Tribunal finds that it would be unjust and inappropriate if these financial and health circumstances in combination were not considered as special. To impose a level of debt upon Mr Koneski as a result of the imposition of the preclusion period would not, in the Tribunal's view, reflect the intention of the legislation which is directed at providing some relief in special circumstances, nor would it be in keeping with the beneficial spirit of that legislation.

59. Having found that special circumstances do exist in Mr Koneski's case, the Tribunal must now consider whether the compensation should be disregarded in part or as a whole. In exercising this discretion, however, the Tribunal must consider the general thrust of the Act. This is particularly important in light of the fact that public funds must be protected and the Tribunal is very much aware that a person should not ordinarily receive Social Security benefits and also compensation for the same period. In reaching a decision on this particular issue, the Tribunal must weigh up the responsibilities it has under the legislation to protect the public purse but also ensure that the beneficial nature of the Social Security legislation is implemented. The Tribunal is of the view that not to treat a whole or part of the compensation as having not been paid would be unjust to Mr Koneski. However, the Tribunal is also of the view that Mr Koneski must accept some responsibility for the difficulty in which he has found himself. Therefore the Tribunal considers that it would be not appropriate to treat the whole of the compensation as not having been paid. The Tribunal considered whether or not the compensation payments should be disregarded from the time of the acceptance of Mr Koneski's Disability Support Pension claim. Because of the Tribunal's concern that Mr Koneski's exercise of choice in the expenditure of his settlement has contributed to his present difficult circumstances, the Tribunal does not consider it appropriate that this date, during the preclusion period, should be the cut off point. The Tribunal considers that in all the circumstances it is appropriate that an amount of compensation in the sum of $1,500.00 be treated as not having made, taking into account not only Mr Koneski's special circumstances and the beneficial intent of the legislation, but also acknowledging the responsibility decision-makers have in protecting the public purse. The Tribunal has therefore attempted to find a balance between the need to protect taxpayers and the public purse but at the same time not propelling Mr Koneski into poverty.

60. Accordingly, for all the reasons set out above, and pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal determines that the decision under review be set aside and substitutes its decision that an amount of $1,500.00 in compensation be treated as not having been made, pursuant to section 1184 of the Act.

I certify that the 60 preceding paragraphs are a true copy of the reasons for the decision herein of:

Ms S M Bullock, Member

Signed: .....................................................................................

Associate

Date/s of Hearing 21 October 1999

Date of Decision 14 February 2000

Representative for Applicant Mr Koneski was self-represented

Representative for the Respondent Ms M Buckley, Departmental Advocate