Carey; Department of Family and Community Services [2002] AATA 114 (22 February 2002)

Last Updated: 27 February 2002

DECISION AND REASONS FOR DECISION [2002] AATA 114

ADMINISTRATIVE APPEALS TRIBUNAL Nº V2001/818

GENERAL ADMINISTRATIVE DIVISION

Re: SECRETARY TO THE

DEPARTMENT OF FAMILY AND

COMMUNITY SERVICES

Applicant

And: HENRY CAREY

Respondent

DECISION

Tribunal: Mr P.J. Lindsay, Senior Member

Date: 22 February 2002

Place: Melbourne

Decision: The decision under review is set aside. The Tribunal substitutes a decision that the respondent is to be precluded from receipt of compensation affected payments for the period 20 September 1997 to 20 February 2004.

(sgd) P.J. Lindsay

Senior Member

SOCIAL SECURITY - disability support pension - lump sum compensation payment - lump sum preclusion period - discretion to vary preclusion period - whether special circumstances exist

Social Security Act 1991 ss17, 1165, 1184

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

Beadle v Director-General of Social Security (1985) 7 ALD 670

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

Secretary to the Department of Family & Community Services v Allan [2001] FCA 1160

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

REASONS FOR DECISION

22 February 2002 Mr P.J. Lindsay, Senior Member

1. The Secretary to the Department of Family and Community Services (the Secretary) has applied for review of the Social Security Appeals Tribunal's (SSAT) decision dated 22 May 2001. The SSAT's decision was to set aside a decision of Centrelink and remit the matter to the Chief Executive Officer of Centrelink for reconsideration in accordance with the direction that, so much of the lump sum compensation payment made to the respondent as would result in a reduction of the length of the preclusion period by 52 weeks, should be treated as not having been made. Centrelink's decision had been to preclude Mr Henry Carey, the respondent, from receiving income support payments under the Social Security Act 1991 between 20 September 1997 and 20 February 2004 (all statutory references below are to the Social Security Act 1991 unless otherwise stated).

2. Mrs R. Bradley, of Centrelink's Advocacy and Administrative Law Section, appeared for the Secretary. Mr Carey appeared in person and his mother Patricia Carey gave evidence.

3. The Tribunal had before it the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T documents) and the exhibits (R1-R8) tendered during the hearing.

BACKGROUND

4. On the basis of the material in the T documents and the evidence of Mr Carey, I am satisfied that on 3 February 1995 Mr Carey, a storeman, was injured at work as a result of falling from a forklift truck. He fell a few metres onto a concrete floor, landing first on his left knee, then on his back and head.

5. After the accident Mr Carey worked on light duties for about 18 months but found he could not continue as his back and legs became sore from his sitting for extended periods. Mr Carey received weekly compensation payments until 20 September 1997 and then disability support pension from 29 September 1997 until 25 August 1999 when the disability support pension was cancelled.

6. Mr Carey, who was born on 9 August 1966, had been seriously injured in a motor vehicle accident when he was a teenager. He gave evidence that he was left in a coma, sustained 28 fractures and later required rehabilitation for about five years. To his great credit, he was able to recover from that accident and resume gainful employment.

7. Around mid 1995 Mr Carey suffered an epileptic seizure. According to a letter dated 13 August 2001 by his general practitioner Dr Avergun, Mr Carey now takes medication continuously to control his epilepsy (Exhibit R 2).

8. Centrelink wrote to Mr Carey on 22 September 1997 to inform him of the legislative requirement to repay social security benefits that had been paid to him from any compensation he might receive and that "any compensation you get may also stop you from getting social security payments in the future." (T5).

9. On 27 July 1999 Mr Carey settled his common law action in respect of his injuries, including for economic loss, for the sum of $280,000 (T8). Mr Carey was legally represented in his common law claim.

10. By letter dated 25 August 1999 Centrelink informed Mr Carey that his disability support pension would be cancelled from 25 August 1999 and that a pension would not be payable to him before 20 February 2004 (T11). A notice to recover the charge amount of $17,969.06 was given to the relevant insurance company on the same day (T10). There is no dispute regarding the calculation of the preclusion period from 20 September 1997 to 20 February 2004.

11. Mr Carey's evidence at the hearing was that he used some of the settlement of $280,000 to buy a two bedroom unit in Mentone, which cost him approximately $215,000. Previously, he had lived at Patterson Lakes in a three bedroom house that he sold for $158,000; he owed no money on the house. His new home at Mentone, which he occupies alone, is smaller and in a more central location. In addition, it requires less maintenance than the house and yard at Patterson Lakes. Mr Carey had found that his ability to carry out domestic duties, such as mowing lawns and cleaning, was significantly impaired by his injuries.

12. In the statement of financial information (T13) dated 29 February 2001 [sic] that Mr Carey provided to Centrelink in support of his application for disability support pension, he estimated his annual income to be $7,280, being interest earnt on term deposits of $130,000. The amount of $130,000 largely represents the remainder of the settlement money, after payment of outlays such as the balance of the purchase price on his Mentone unit and repayment of the $17,969 charge in respect of the disability support pension received from September 1997 to August 1999.

13. Centrelink treated the respondent's letter of 14 February 2001 as a request for a review of the decision regarding the length of the preclusion period. On 21 March 2001 an authorised review officer within Centrelink informed Mr Carey that the decision had been affirmed and therefore the preclusion period of 20 September 1997 to 20 February 2004 would not be altered (T17).

14. On 17 April 2001 Mr Carey applied to the SSAT for a review of the decision imposing a preclusion period from 20 September 1997 to 20 February 2004. On 22 May 2001 the SSAT set aside the original decision and remitted the matter to Centrelink for reconsideration with a direction that the preclusion period be reduced by 52 weeks. The SSAT found that, due to special circumstances, it was appropriate to exercise the discretion under s.1184. The Secretary appealed to the Tribunal on 4 July 2001.

EVIDENCE

15. On 14 February 2001 Mr Carey wrote the following to Centrelink to request the resumption of disability support pension payments before 20 February 2004 (T12):

...

The money I now have left is not earning sufficient for me to live on. At the end of four [sic] years I will have nothing to compensate me for my pain and suffering and my lack of lifestyle.

Because of my accident my cost of living is high. I have to taxi everywhere and I find it hard to make ends meet. Also I get very depressed thinking about my future and how I will be able to cope in years to come.

He also referred to the fact that his doctors had informed him that he would be unable to return to work due to his medical condition.

16. In his letter to Centrelink of 17 April 2001, Mr Carey reiterated that his cost of living expenses had increased after the accident. He again referred to his need to travel by taxi which was costing him a lot of money and to medical opinion that he would be unable to resume work. He also referred to his hospitalisation as a result of suffering another grande malle seizure. Mr Carey wrote (T18):

...

I may need modified accommodation in the future or help to cope with injuries or the epilepsy. I worry that I will not have funds left to cope with these types of expenses that I will eventually incur.

I have been prudent with my money but the $17,421.03 that is my household expenditure does not cover all the costs of living. I feel that the money I have in the bank was not part of the compensation payout. As a person with disabilities, I have more medically related expenses than the average person. I feel I am entitled to the disability pension now.

17. At the hearing, Mr Carey told the Tribunal about changes in his financial position that had occurred since he completed his statement of financial circumstances in February 2001 (T13). Mr Carey said that he thought he had underestimated the amount he spent on groceries which should be about $130 to $140 a week and not $80 a week. He informed the Tribunal that there was no material change to the amount he outlays on general expenses, household expenses and transport expenses, including taxi fares. There is no evidence to suggest that the estimate (T13) of his annual chemist expenses of $300 should be increased. Mr Carey bears no costs in respect of any medical treatment but his statement of financial circumstances estimates that he spends $400 a year on dental treatment and the same amount at the optometrist. He does not have any credit card debt or other consumer debt.

18. However, the income he currently earns from his term deposit is about $3,900 per annum. The lower return is in part due to a lower rate of interest he receives and the fact that he now has $100,000 on four month term deposit and $8,000 in a savings account. Mr Carey explained that the smaller amount now on term deposit was due to having spent some of the fund on a two month trip overseas late in 2001. He visited cousins in Ireland and toured Europe. While in Ireland, Mr Carey had an epileptic fit requiring him to be in hospital for two days.

19. Mr Carey draws much emotional support from his immediate family, which he described as being close-knit. He has four siblings with whom he has good relations and quite frequent contacts. Before his accident in 1995, he used to enjoy regular weekend fishing and camping trips with one of his brothers. Since his accident, he has sold his caravan and boat, and says that he lacks the get up and go even to fish at the local pier.

20. About four or five times a week Mr Carey visits his father, who lives with Mr Carey's mother in Chelsea Heights, about nine kilometres away from his home. They keep each other company for most of the day. Mr Carey told the Tribunal that they are very close. In a letter (Exhibit R1) that Mr Carey sent on 11 September 2001 to the Secretary and the Tribunal, he described the impact that his father's ill health was having on his own condition. The letter noted that Mr Carey's father suffers from frontal lobe dementia, an enlarged heart, asbestos plaques on his lungs, fibrositis, tinnitus and an associated anxiety state; he has a prosthetic eye and partial sight in his good eye; and around the time of the letter, had been in hospital for three weeks with pneumonia having almost died from a related toxic shock episode. Mr Carey wrote that:

...

I am extremely close to my father and this has caused me great stress. This has also been expensive for me as I have incurred costs such as taxi fees, helping out etc even though I have done so willingly. This is an ongoing situation.

I hope you will take these factors into consideration as a further part of my case.

21. A medico-legal report of Dr P. Graf, consultant psychiatrist, dated 19 November 1998, prepared for Mr Carey's solicitors, noted (Exhibit R7):

...

The main feature at my interview was his depressed mood and general state of arousal. ...

His physical injuries and chronic pain has been complicated by the development of a significant depression, which so far is largely untreated, despite a number of attempts by his general practitioner to do so. Mr Carey presents as a relatively socially isolated man ...

In my opinion, all these factors combine to make it very unlikely that he will ever be employed at any time in the future.

The prognosis for his depression is also poor, both because of his past head injury and because of the ongoing chronic pain and social isolation.

Further active treatment of his depression is recommended however, and I have asked him to discuss this further with his general practitioner.

From what Mr Carey has written and what he has told the Tribunal about his fears for his own future and his concerns about his father, it appears his depressed condition continues.

CONSIDERATION OF ISSUES AND FINDINGS

22. One of the objects of Part 3.14 of the Social Security Act 1991, "Compensation recovery", is to preclude persons who have received compensation for some economic loss (whether lost earnings or lost capacity to earn), from receiving social security benefits in respect of the loss for a period of time. Heerey J in Secretary to the Department of Family & Community Services v Allan [2001] FCA 1160, para. 1, explained that the provisions in Part 3.14 deal with:

... the suspension ("preclusion") of social security benefits where recipients have received compensation for loss of earnings by awards under workers compensation legislation or damages at common law. The basic policy, understandably enough, is that there should not be "double dipping". People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source.

23. Under the Act, benefits received pending the resolution of an action for damages or compensation may have to be repaid. In Mr Carey's case the sum of $17,969.06, which he received as disability support pension from September 1997 to August 1999, had to be repaid to Centrelink. Following resolution of the action, benefits may be suspended for a period - the preclusion period. Section 1165(1A) provides for a preclusion period where, as is the case here, a single person receives lump sum compensation.

24. The Tribunal finds, on the basis of the insurer's notice of lump sum compensation payment (T8), that on 27 July 1999 Mr Carey was paid a lump sum of $280,000 in settlement of a common law claim. The payment is "compensation" as defined in s.17(2) that was "made wholly or partly in respect of lost earnings or lost capacity to earn." The disability support pension that Mr Carey had received in the past and which is the subject of his request for resumption of payment before 21 February 2004 is a "compensation affected payment" as defined in s.17(1). Accordingly, s.1165(1A) is attracted and it provides:

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 new lump sum preclusion period 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).

25. In Mr Carey's case the preclusion period is 20 September 1997 to 20 February 2004, a period of 335 weeks. The period was determined by an income cut-out amount of $417.80 (refer to s.17(8)), the compensation part of the lump sum being $140,000 (refer to s.17(3)) and the application of the formula in s.1165(8):

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 compensation part of lump sum, see section 17.

Note 2: For income cut-out amount, see section 17.

That period may be varied by the Secretary in exercise of the discretion conferred by s.1184(1) which states:

1184(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

(a) not having been made; or

(b) not liable to be made;

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

26. The nature and scope of the discretion, and in particular the meaning of the expression "in the special circumstances of the case", have been the subject of a number of judicial pronouncements. The Full Federal Court, when examining this expression in the context of s.102 of the Social Security Act 1947 in Beadle v Director-General of Social Security (1985) 7 ALD 670, approved the following passage from the Tribunal's decision in that case ((1984) 6 ALD 1 at 3):

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

27. Having regard to the nature of Mr Carey's evidence, it is appropriate to begin by considering whether he is suffering from any financial hardship that would warrant the exercise of the discretion to shorten the preclusion period.

28. At present Mr Carey has approximately $108,000 in funds readily available to him. In addition, he owns his home valued at $205,000 (T13) free of debt. Based on his assets, Mr Carey is in a sound financial position.

29. Due to his epilepsy, Mr Carey does not drive. He informed the Tribunal that Mentone station is about a 15 minute walk from his home. Although he can walk the distance to the station, Mr Carey chooses to travel by taxi, whether visiting his family, the doctor or going on social outings, as he finds walking on uneven surfaces difficult and can lead to falls. Mr Carey is concerned that his level of expenditure on taxis (estimated in T13 at approximately $2,600 a year) is causing him to spend his funds too quickly.

30. Mr Carey's estimated yearly discretionary expenditure on entertainment, clothing and tools/books of approximately $6,150 (T13) suggests that, although not living lavishly, he is not needy. It was noted earlier that Mr Carey holidayed abroad for about two months during the latter part of 2001.

31. Mr Carey is providing filial and emotional support to help his father cope with his illnesses. His mother and father each receive the age pension. There is no evidence before the Tribunal to suggest that his father is a financial dependant of Mr Carey or that Mr Carey is incurring additional expenditure to help take care of his father.

32. By moving from Patterson Lakes to a more expensive property at Mentone and by his travelling overseas, Mr Carey has not preserved his settlement funds to help maintain his income during the preclusion period. It is apparent that during the preclusion period, Mr Carey's annual estimated living expenses of $17,421 (T18) will exceed his income from investments and that the shortfall will, in all likelihood, have to be made up by drawing on the investments.

33. The Tribunal accepts that Mr Carey is genuinely concerned about his future financial independence. It is instructive at this point to note the dictum of Sheppard J in Director-General of Social Services v Hales (1983) 47 ALR 281 at 321 that:

... 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.

Mr Carey, however, is not impecunious. His financial assets are returning an income and he has no debts. Nor can it be said that he is in straitened circumstances. It is not surprising that those who receive compensation for loss of earnings or future earning capacity would prefer not to have to draw on their settlement monies or damages in order to pay for daily living expenses, but they would be ignoring the object of the legislation " ... to avoid double payments for an inability to exercise an earning capacity" (Secretary, Department of Social Security v a'Beckett (1990) 21 ALD 79 at 88).

34. Having regard to his current assets and financial position as a whole, the Tribunal does not consider Mr Carey to be in financial hardship. He has available to him sufficient funds to enable him to meet his living expenses throughout the preclusion period. Any concern about his capacity to pay for these expenses is not attributable to circumstances that are "unusual, uncommon or exceptional" (Beadle's case). The Tribunal is not satisfied that the need to finance the shortfall by resorting to capital during the preclusion period is such that it would permit Mr Carey's financial circumstances to be described as special circumstances under s.1184(1).

35. As to Mr Carey's medical problems, he said in cross-examination that he has not sought specialist medical treatment for his back, left knee or epilepsy since receiving his settlement. He estimates that he would visit Dr Avergun on a weekly basis in relation to the chronic pain in his knee and back, depression, problems with his memory and epilepsy. Since returning from his overseas holiday he has had to receive physiotherapy treatments for his back. However, Mr Carey is not incurring expenditure on his treatment, let alone increased medical costs, except for taxi fares to and fro.

36. It is unfortunate that Mr Carey is suffering from multiple medical conditions that result from the injury that led to the receipt of the settlement money, but that alone is not unusual nor does it differentiate Mr Carey from others who have received compensation for injuries and who are subject to preclusion periods. On the evidence before the Tribunal, and allowing for Dr Graf's opinion that Mr Carey is unlikely to resume employment (Exhibit R7), his health is not such that his circumstances could be considered unusual, uncommon or exceptional.

37. Are there any other factors present that would justify finding special circumstances to exist? During the past decade, legislative amendments have had the effect of altering the length of preclusion periods. This has occurred through amending the divisor in the fraction for working out preclusion periods. The treatment of existing compensation recipients is usually grandfathered, so that their preclusion periods are not affected by such amendments. An amendment was made with effect from 20 March 1997 that increased the length of preclusion periods. More recently, the divisor was changed as a consequence of the introduction of the goods and services tax. The effect of that amendment was to reduce preclusion periods. That amendment commenced after Mr Carey's preclusion period had been set, although at the time of his settlement the legislation for the goods and services tax had been enacted by Parliament and received Royal Assent (A New Tax System (Goods and Services Tax) Act, being Act Nº 55 of 1999).

38. Ms Bradley submitted that legislative amendments to social security law, whether to eligibility criteria, preclusion periods or other matters, affect the entire community and are not in themselves grounds for finding special circumstances. Heerey J in Secretary, Department of Family and Community Services v Allan [2001] FCA 1160, para. 18, has said that:

... A factor which applies to all, or a substantial part of, the community need not necessarily be excluded in considering the range of circumstances which affect an individual and whether those circumstances in total can be said to be "special".

The impact of the goods and services tax, therefore, is another factor that may be taken into account in combination with other factors, when deciding whether Mr Carey's circumstances amount to special circumstances. The significance of that factor will be determined by the relevant evidence.

39. There was no evidence before the Tribunal regarding any impact that the goods and services tax may have had on Mr Carey. Moreover, when the Tribunal considers the whole of his circumstances and in particular the strength of his current financial position, it is not satisfied that the consequences for Mr Carey, if any, as a result of an amendment to the amount of the divisor that took effect after the calculation of Mr Carey's preclusion period, is such as to justify a finding of special circumstances.

DECISION

40. After taking into account Mr Carey's circumstances overall, the Tribunal, for the reasons given above, does not consider there to be special circumstances that warrant the exercise of the discretion in s.1184. Accordingly, the SSAT's decision is set aside and in substitution the Tribunal decides that Mr Carey is to be precluded from receipt of compensation affected payments for the period 20 September 1997 to 20 February 2004.

I certify that the forty [40] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr P.J. Lindsay, Senior Member

(sgd) Catherine Thomas

Clerk

Date of Hearing: 18 January 2002

Date of Decision: 22 February 2002

Solicitor for the Applicant: NIL -- Mrs R. Bradley, advocate with Centrelink

Solicitor for the Respondent: NIL -- IN PERSON