Ford; Department of Family and Community Services [2002] AATA 369 (20 May 2002)

Last Updated: 22 May 2002

DECISION AND REASONS FOR DECISION [2002] AATA 369

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/1453

GENERAL ADMINISTRATIVE DIVISION )

Re Secretary, Department of Family and Community Services

Applicant

And Gregory Ford

Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date 20 May 2002

Place Sydney

Decision The Administrative Appeals Tribunal affirms the decision under review.

[SGD] Ms N Isenberg

Member

CATCHWORDS

SOCIAL SECURITY - lump sum workers' compensation payment - preclusion period - whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made - unfairness of the strict application of the '50% rule' - incorrect advice from Centrelink - financial hardship - ill health

LEGISLATION

Social Security Act 1991 - sections 17 and 1184

CASE LAW

Beadle v Director of Social Security (1984) 6 ALD 1

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

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

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

Re Green and Secretary, Department of Social Security (1990) 21 ALD 772

Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67

Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64

Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147

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

Groth v Secretary of Social Security (1995) 40 ALD 541

Re Colaiacolo and Secretary, Department of Social Security (AAT N84/439, 24 April 1985)

Re Beadle and Director General of Social Security (1985) 60 ALR 225

Haidar v Secretary of Social Security (1998) 52 ALD 255

Secretary, Department of Social Security v Ellis (1997) 46 ALD 1

Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211

Allan and Secretary, Department of Family and Community Services [2001] AATA 271

Stephens and Department of Family and Community Services [2001] AATA 108

Nikolov and Secretary, Department of Social Security (AAT 7452, 11 July 1991)

Re Martin and Secretary, Department of Social Security (AAT 6482, 14 November 1990)

REASONS FOR DECISION

20 May 2002 Ms N Isenberg, Member

DECISION UNDER REVIEW

1. This is an application for review by the Secretary, Department of Family and Community Services ("the Department") of a decision of the Social Security Appeals Tribunal ("the SSAT") dated 13 August 2001 (T2). The SSAT set aside the decision of a Centrelink delegate of the Department dated 13 January 1999, (and affirmed by an authorised review officer on 25 November 1998) which imposed a compensation preclusion period between 2 April 1998 and 30 October 2002 on Mr Greg Ford, the Respondent in these proceedings, and remitted the matter to the Department for reconsideration in accordance with the direction that so much of the compensation payment be disregarded as would impose a lump sum compensation preclusion period beyond 13 August 2001 (T13, T15).

2. At the hearing, the Department was represented by Hannelore Schuster, an advocate from the Advocacy and Administrative Law Team at Centrelink and the Respondent was represented by Jackie Finlay of the Welfare Rights Centre.

ISSUES BEFORE THE TRIBUNAL

3. There was no dispute that if the statutory formula were applied to the Respondent's circumstances a preclusion period would result from 2 April 1998 to 30 October 2002.

4. It was agreed between the parties that the central issue in this matter was the application of section 1184 of the Social Security Act 1991, that is, whether there are any "special circumstances" in the Respondent's case to reduce the length of the preclusion period.

LEGISLATION

5. The Social Security Act 1991 ("the Act"), provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard the whole or part of the compensation payment in "special circumstances", as follows:

"Secretary may disregard some payments

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."

EVIDENCE: Documents

6. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Act 1975 ("the T-documents"), which the Tribunal took into evidence. The following documentary evidence was also before the Tribunal:

Exhibit No Description Date

A1 Department's Statement of Facts and Contentions 21 January 2002

A2 Letter from GIO to Centrelink 29 November 2001

A3 GIO letter 23 January 2002

A4 Centrelink payment records for Mr and Mrs Ford

A5 Compensation Divisor

R1 Respondent's Statement of Facts and Contentions 28 March 2002

R2 Letter from Mr Ford to AAT 28 September 2001

R3 Centrelink letter 7 May 1998

EVIDENCE: Mr Greg Ford

7. The Respondent gave sworn evidence and was cross-examined on behalf of the Department. Questions were also put to the Respondent by the Tribunal. The Respondent told the Tribunal that he had been hit by a backhoe while at work and injured his neck, lower spine and his right ankle. The following day, he had been 'sacked'. He had worked all his life in the bush and on machinery and those occupations were no longer open to him because of his back injury.

8. Mr Ford said that while attending a solicitor about another matter he had mentioned that he had been injured at work. The solicitor arranged "all the paperwork" to commence workers' compensation proceedings and advised the Respondent to remain on compensation rather than seek benefits through Centrelink. By the end of three years of litigation, when the matter was finally listed in Newcastle, he and his wife were ready to "walk away" as it was "hell on (my) nerves".

9. Mr Ford said that he understood his wife to have phoned Centrelink at about the time when the matter was listed for hearing, although in cross-examination he thought that his wife had phoned Centrelink about a fortnight before the court case. At some stage, she rang on a second occasion and the information she received was the same. His understanding was that the preclusion period dated from the time of the accident and that this was a logical approach.

10. The Respondent and his wife thought that if they could get some money they would be prepared to settle, although before they went into court they had no particular figure in mind. In discussions with his wife and the solicitor, the Respondent believed he would receive around $100,000 by way of settlement. He expected that there would still be money left over for necessary future medical expenses. He understood that there would be a preclusion period but did not know how long that would be. He said his solicitor was aware that there would be a preclusion period but did not know how this was to be calculated. Upon settlement he received about $100,000

11. With his settlement monies, the Respondent 'paid back' about $30,000 which he and his wife had 'borrowed' from savings to assist in covering their living expenses while he was on compensation.

12. On 7 May 1998, the Respondent and his wife received a letter from Centrelink (Exhibit R3) in response to Mrs Ford's application for unemployment benefits. From that letter, he understood that the preclusion period had concluded on 2 April 1998, and his solicitor said that that was a good outcome.

13. The Respondent's recollection was that he received a couple of partner allowance payments in his and his wife's joint account following the letter of 7 May 1998 (Exhibit R3) from Centrelink. In cross-examination, it was put to Mr Ford that Centrelink's records do not show that he received any partner allowance at that time and he reiterated that he understood payments in their joint account did relate to that benefit. (The advocate for the Department conceded that a change in Centrelink computers at about that time might mean the computer record is incomplete.)

14. In cross-examination, Mr Ford was also asked about his response to the letter of 26 August 1998 (T6) in which he was advised that the preclusion period was to end on 12 December 2001. He said that he and his wife went twice to see 'the girl' in the Newcastle office of Centrelink and his complaints have ultimately led to the present appeal.

15. At the time of the accident, he was receiving net benefits of $600-$700 per week, and had assets of $130,000, which were the proceeds of the sale of their previous home. He and his wife had bought land at Wingham on which to build and the plans had been lodged with the local council.

16. In about 1999, the Respondent and his wife decided to sell the land and move to the Buxton area to live closer to their relatives. At first they rented (at a cost of about $150 per week) and later bought land for $42,000 upon which a project home was built at a cost of $85,000. They had been looking for property there for some time following the accident, when it was clear there would be no work for the Respondent if he remained in the Wingham area.

17. There had been some unexpected expenses since the settlement such as having to pay for driveways and paths and a council-required retaining wall. In addition, he had found the fuel costly for his daily trips to Bowral when his mother was very ill. He also had to buy a new car prior to the settlement.

18. The Respondent and his wife had no special plans for spending the settlement monies, but they did not have an extravagant lifestyle from the time of the accident, nor from the time of the compensation payment, and do not have an extravagant lifestyle now. By the time of the hearing before the SSAT all of the settlement monies had been spent.

19. As to the family assets, the Respondent said he has a small superannuation account and some NRMA shares. He said he had been saving since he started work at age 14 and that he should be allowed to maintain those savings. Mrs Ford has not worked.

EVIDENCE: Mrs Marlene Ford

20. Mrs Ford gave sworn evidence and was cross-examined on behalf of the Department. Questions were also put to Mrs Ford by the Tribunal.

21. Mrs Ford described how, after the accident, she and her husband had sought advice from a Chamber Magistrate who referred them to a solicitor. For the next three years their life was 'a misery' while the solicitor 'went into a whirlwind' sending her husband to medico-legal examinations, to which she had to chauffeur him. When the matter approached hearing, the venue was changed three times, and the barrister was different on each occasion. It finally looked like the matter might get heard on its third listing, at Newcastle. They sat around at court for two days and again the matter looked like it might not be reached. They could see costs escalating and the solicitor said there would need to be another round of doctors' appointments. Settlement negotiations commenced and their idea was that they would need something 'left over' in case her husband needed further operations, as was likely.

22. Before the matter was finally listed Mrs Ford had contacted the Taree Centrelink office and was given a contact number where she could inquire about the effect of compensation payments on entitlement to benefits. She spoke to a 'mature man' and scribbled down the information he provided (T17). She said he was 'quite definite' that the gross settlement amount, less all expenses would be divided by two, then by a certain figure, which she wrote down, and from that the preclusion period would be calculated. At the end of that time she would be able to apply for unemployment benefits. The starting date was the date of the accident. She said she asked the man: "you're quite sure about that?" and he replied that he was. She said that they did not rely completely on that information in coming to the decision to settle but it did help them decide. No detailed amount was discussed at that time because settlement negotiations had not yet commenced.

23. In cross-examination Mrs Ford was asked about solicitors' costs. She said there had been a costs agreement, and even allowing for the 'scale' in the agreement, they thought the solicitors' costs and disbursements (nearly $56,000) were very high. The man to whom she spoke had told her empathically that all costs would be deducted in the calculation of the preclusion period, and she took that to mean the solicitors' costs as well.

24. Mrs Ford said she had understood that the higher the settlement amount, the longer would be the preclusion period. She was asked as to what difference it might have made to their settlement considerations had they been aware of the full preclusion period. She said they might have gone on with the hearing.

25. After they received the net compensation payment in about March 1998, Mrs Ford applied for unemployment benefits and in her application 'put in all the information'. When they received the letter of 7 May 1998 (Exhibit R3) which stated that her husband could qualify for partner allowance they understood that the preclusion period was over. They had thought the preclusion period would be longer, but accepted the information provided because it had been some three years since the accident. Later, when additional amounts were paid into their joint account they thought these related to the partner allowance.

26. Mrs Ford said that they had saved money for years to build a house but after the accident there was no point in remaining in the area and they decided to move to Buxton to be closer to their family. In about October 1999, they moved from the area to Hilltop, while investigating the Buxton area. In September 2000 they moved into their new home.

27. Mrs Ford confirmed her husband's evidence that at the time of the accident their assets consisted of savings for their home, the block of land, a small amount of superannuation and, later, the NRMA shares. The settlement monies had been spent on a new car ($27,000) which she 'lent' her husband out of the savings for the house. In addition, in relocating, there were two lots of removalists expenses (less than $2000), new floor coverings, fencing, unforseen council requirements and electricity trenching. The car required fuel injectors and other repairs and had a broken windscreen. They needed to replace their 25 year old bed, and the TV which had 'blown up'. Some money was also necessary for clothing, gifts for the grandchildren and linen. From September 2000 their annual expenses have totalled about $14,500. Another $100 per month is payable for sewerage pump out.

28. As to her own health, Mrs Ford said that she had not been well before the accident but since that time had been severely stressed, for which she still takes anti-depressants. She has a serious blood disorder (scleroderma), extremely high cholesterol and arthritis. The medication available to her is limited because of detrimental effects to her gastro-intestinal system. Her husband takes codeine and panaedeine forte for his back pain, but she tries to limit the amount he takes because they are addictive. Mr Ford has a severe hiatus hernia for which he takes continual medication. Even with a HealthCare card they spend about $25 per month on medication.

SUBMISSIONS: the department

29. The advocate for the Department submitted that there were no special circumstances in the Respondent's case such that the discretion to disregard parts of the compensation payments pursuant to section 1184(1) of the Act should be exercised. As to what amounts to special circumstances she referred to Re Beadle and Director General of Social Security (1984) 6 ALD 1, in which Toohey J stated at ALD 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".

30. The Department's advocate invited the Tribunal's attention to the attempts that have been made in various decisions to specify relevant factors to be taken into account as "special circumstances". In light of the Federal Court decisions in Secretary, Department of Social Security v Hulls (1991) 22 ALD 570; Secretary, Department of Social Security v Smith (1991) 23 ALD 277; and Secretary, Department of Social Security v Banks (1990) 20 ALD 19, the Department submitted that such attempts can only be seen as providing guidance on the facts of the particular case concerned and cannot be elevated to the status of rules of general application. The relevant factors specified in the cases vary from factors couched in quite general terms to quite specific terms. For example, in Re Green and Secretary, Department of Social Security (1990) 21 ALD 772, Barnett SM at ALD 773 listed the factors in general terms as follows:

"- The use of the word "special" is "intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case".

* "hardship is a relevant consideration" but regard must be had to the way in which the hardship arose.

* there must exist "factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes".

* the decision-maker must have regard to whether, by exercising the discretion in a particular case he/she will be "achieving or frustrating ends or objects which are conformable with the scope and purpose of the Social Security Act".

* "the decision-maker must be prepared to respond to special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate"."

31. The advocate for the Department first addressed the application of the '50% rule'. She referred the Tribunal to the decision in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 , a decision the Tribunal was asked to prefer over the decisions in Secretary, Department of Social Security v Smith (1991) 23 ALD 277 and Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64. In particular, she referred to paragraphs 33 and 35 of Secretary, Department of Family and Community Services v Chamberlain [supra], as follows:

"33. In the present case the Tribunal considered that the application of the formulae was unfair to the Department because she would have to pay more than she had received by way of compensation for economic loss, indeed twice a s much. That factor will however be present in most cases and is an aspect of the application of the formulae. In my view it cannot, by itself, amount to a special circumstance, one out of the ordinary."

"35. The statutory objectives in utilising the formulae, referred to above, must also be borne in mind. It is not intended that a decision-maker be required to consider contentions about what part of the compensation reflected the economic loss component. That is so whether one has regard to the application of the formulae or the discretion under s1184. The latter does not alter the objective and must be read in light of it."

32. As to the Respondent's position that he had been disadvantaged by the change in divisor and introduction of the GST, the advocate for the Department said that these were matters which affected everyone and did not, of themselves, amount to special circumstances. The Tribunal was asked to distinguish Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 from the current matter before the Tribunal, as in that case the change in compensation divisor and introduction of the GST was only one of the dramatic circumstances present and in that case there had been very long preclusion period imposed.

33. It was further submitted that even if apportioning were available and the July 2000 divisor was applied in this matter, there would be very little difference to the preclusion period.

34. The Respondent has claimed that he and his wife were unable to manage on their available funds and that after spending the lump sum payment on a new property, legal fees and living expenses, they were in financial hardship. The Respondent received a sum of $100,000 net in 1998, that amount being approximately equivalent to ten years of pension payments. The Respondent's wife was also in receipt of benefits in her own right from April 1998. It was contended by the Department that even if spent at a rate of $500 per week, the compensation payment was more than sufficient to maintain the Respondent and his wife during the preclusion period.

35. The Respondent was on notice of the preclusion period ending on 30 October 2002. As early as 1998, the Respondent indicated that he did not agree with the length of the preclusion period and continuously sought to have it reduced. Nonetheless, the Respondent expended his available funds on purchasing property and building a house.

36. The Department submitted that the context of the provisions of the Act is income support, not acquisition of real property at the expense of the public purse.

37. It was noted that the Respondent is not entirely without means. There is nothing to prevent the Respondent from accessing his superannuation funds on the grounds of hardship. The couple also appear to own about 1000 NRMA shares. Furthermore, the Department submitted that the Respondent has a substantial unencumbered asset, his property, which could be sold or mortgaged in order to provide him with a means of support until October 2002.

38. To qualify as "special circumstances", financial hardship must go beyond "straitened" circumstances and be truly exceptional. The Department contended that the Tribunal should decline to find special circumstances, as the Respondent has not exhausted his financial options.

39. The advocate for the Department addressed the Tribunal in relation to the advice which had been provided to Mrs Ford by Centrelink. Mrs Ford gave evidence as to a formula for calculating the lump sum. It was submitted that any partial information Mrs Ford may have obtained was not special or unusual.

40. Any information provided depends to a large extent on the detail provided by the questioner. The Department has been unable to locate anyone in Centrelink who recalls being contacted by Mrs Ford. The note provided by Mrs Ford (at T17) may give an indication of her understanding of information she received, but it does not indicate what details she provided, nor what information was offered, the generality or specificity of discussions or figures canvassed.

41. The Department submitted that the authenticity of the document itself might be questionable, particularly as the SSAT observed that some of the note was in different coloured ink. The evidence did not support the view that advice had been given that the start date for the preclusion period was the date of the accident. It was also unknown what legal advice the Respondent may have received in relation to the preclusion period.

42. It was also said that informal telephone advice had only a minor impact on the complex decision made by Mr and Mrs Ford which led to the settlement for $250,000. A reasonable assumption would be that settlement of this case, as in other such cases, was based on a weighing up of a plethora of issues surrounding any litigation, rather than general, informal advice received from Centrelink about the calculation of a possible preclusion period.

43. As to the letter dated 7 May 1998, the advocate for the Respondent submitted that it was consistent with an interpretation of the letter that 4 April 1998 was the start date, rather than the end date, of the preclusion period. She conceded that the advice given to her by Centrelink about being eligible to apply for partner allowance was wrong.

44. In any event, it was submitted by the Department that there was no evidence that the Respondent relied on information provided by Centrelink to any material degree.

45. Any incorrect assumptions Mr or Mrs Ford had made about the preclusion period were corrected by the advice given by the Department in October 1998, that the preclusion period would end on 30 October 2002. By that time the Respondent had not finally committed to the house purchase and the compensation money was still largely intact.

46. The advocate for the Department submitted Mr Ford's ill health is not disputed and that he continues to suffer from his injuries sustained in the accident. However, there is little indication that those injuries, per se, would require substantial ongoing costs. The advocate for the Department referred the Tribunal to a number of cases in which health issues were found not to constitute special circumstances.

47. The Tribunal in Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464, found that ill health alone is not enough to constitute a special circumstance. The Department noted that, invariably, recipients of compensation will have health problems.

48. In Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797 the applicant, his wife and daughter all had considerable health problems. There, the Tribunal said, at ALD 800 that:

"Mr Groth is unable to work and requires treatment. Mrs Groth has difficulties as does Shilo (their daughter). Looking at all of those health difficulties, they are not such that the operation of the [compensation] provisions becomes unjust or unreasonable".

49. In Re Colaiacolo and Secretary, Department of Social Security (AAT N84/439,24 April 1985), the applicant and his family had considerable health problems. In addition the applicant and his family did not own their own home and had assets worth only $3,000.

50. The advocate for the Department submitted that the Respondent's disabilities and his wife's health problems are not "special circumstances" which would make it appropriate to exercise the discretion.

51. The advocate for the Department referred to the purpose for which discretion is conferred. She submitted that the expectation underpinning the compensation regime is that a person will use part of a lump sum settlement to maintain themselves. The object and purpose of the compensation legislation is to prevent 'double dipping', that is, being paid for the same period from two sources. Conversion of all of the lump sum into substantial assets is contrary to the intent of the legislative scheme and should not be relieved by the use of section1184.

52. The Department submitted that the purpose of the discretion conferred by section1184 is not to assist those who put themselves in a position that leaves them without living expenses for the remainder of a lengthy preclusion period, while in possession of substantial unencumbered assets. In this case, the use of section 1184, to shorten the preclusion period by two years, would frustrate the intent of the legislation and would place undue burdens on the public purse.

53. In summary, the Department submitted that the decision of the SSAT made on 13 August 2001 should be set aside and a new decision should be made that there are no special circumstances that would make it appropriate to disregard any of the compensation payments made to the Respondent.

SUBMISSIONS: Mr Ford

54. The advocate for Mr Ford sought to have the whole or part of the compensation payment treated as if it had not been paid, pursuant to the discretion in section 1184(1) of the Act. That discretion may be exercised where it is appropriate to do so in the special circumstances of the case. She referred to a number of Federal Court cases, the most recent of which is Kertland v Secretary, Department of Family and Community Services [supra], which establish that the term "special circumstances" is intended to allow the decision maker the fullest opportunity to consider the particular circumstances of each case.

55. The discretion to disregard the whole or part of a compensation payment can be exercised where application of the usual rules would lead to a result that is unfair or inappropriate (see Beadle v Director General of Social Security (1985) 60 ALR 225 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570).

56. Section 1184(1) is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. Special circumstances do not have to be statistically "extreme" or "unique", it is sufficient if there is something that takes the matter out of the usual ordinary case, (see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1)

57. The Federal Court in Secretary, Department of Social Security v Smith (1991) 30 FCR 56 held that it is appropriate for the discretion under section 1184 to be used where the arbitrary nature of the "50 % rule" results in unfairness in a particular case.

58. The advocate for the Respondent submitted that there are a number factors in Mr Ford's case that, when considered together, can be regarded as 'special circumstances' sufficient to make it appropriate to exercise the discretion in section 1184. These factors include:

(1) Unfairness of the strict application of the '50% rule' by virtue of:

- the low net amount of settlement money received by Mr Ford;

- the low amount received for economic loss and the high solicitor costs;

- decision to remain on compensation; and

- the change in divisor used in preclusion calculations due to the introduction of the GST.

(2) Incorrect Centrelink advice.

(3) Financial hardship.

(4) Ill health.

59. Each was addressed in turn.

(1) Unfairness of the strict application of the '50% rule'

60. It was submitted that there are a number of factors in Mr Ford's case that make the strict application of the '50% rule', in calculating a preclusion period, so unfair to Mr Ford that it can be held that special circumstances exist pursuant to section 1184.

61. From a $250,000 compensation settlement, the Respondent only received $100,000. $94,000 was paid back to GIO to cover weekly compensation from the date of the accident and medical costs; and over $55,000 was paid in solicitors' costs and disbursements. The amount assessed by Centrelink as compensation pursuant to section 17(3) of the Act was $96,547.09. Thus, the compensation assessed under the '50% rule' is roughly equivalent to the net compensation amount the Respondent actually received.

62. The advocate for the Respondent noted that Mr Ford's insurance company provided a breakdown of the lump sum compensation (T35). The actual amount for all economic loss was $65,000. This is a lesser amount than the $96, 547.09 taken into account under the '50% rule' applied by Centrelink. A preclusion period based on $65,000 would have ended after approximately 161 weeks or around May 2001.

63. The advocate for the Respondent referred to Kertland v Secretary, Department of Family and Community Services [supra], where Merkel J stated at FCR 71:

"In Smith, to which I will later return, on Doussa J rejected a contention put on behalf of the Secretary that the "circumstances of the case" should be confined to matters which are external to the operation of the statutory scheme. His Honour made the point, with which I respectfully agree, that a distinction cannot meaningfully be drawn between matters external to the operation of the scheme and matters which are the product of the strict application of the scheme."

64. This view was endorsed by Mansfield J in Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211, who stated at ALD 217

"Indeed, in my view, s1184 is designed specifically to enable the respondent, and on review the Tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act."

65. It was contended that where the amount received for economic loss is significantly less than that deemed to be the compensation part of the lump sum by virtue of the application of section 17(3) of the Act, and brings about an unfair, unjust or unreasonable result, this is a factor relevant to the exercise of the discretion in section 1184. In this case the amount itemised as economic loss was significantly less than that deemed under the '50% rule' and the amount deemed as economic loss under the '50% rule' was only about $3,000 more than the total net compensation received by the Respondent.

66. The Respondent also submitted that Mr Ford was charged excessive solicitor costs and this was also a factor that compounds the unfairness in this case of the arbitrary nature of the '50% rule.'

67. It was also submitted that had the Respondent begun to receive social security payments instead of remaining on compensation payments he would in fact have been in a better financial position and, further, by the time of settlement the preclusion period would almost have been over. In addition, he would have been in receipt of a HealthCare card, which would have reduced his medical expenses.

68. The advocate for the Respondent also observed that there had been changes in the compensation divisor used to calculate preclusion periods and that the Respondent had been adversely affected by the introduction of the GST. Because of these changes, the Respondent, receiving a lump sum compensation between March 1997 and July 2000, had a much longer preclusion period than those who received compensation before March 1997 and after July 2000.

69. In reference to the impact of the GST, the advocate referred the Tribunal to Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 where Heerey J stated at ALD 151:

"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"."

70. In Allan and Secretary, Department of Family and Community Services [2001] AATA 271, and Stephens and Department of Family and Community Services [2001] AATA 108, the Tribunal regarded the effect of the GST on the applicants' costs of living as one of the special circumstances in their cases. In Stephens v Department of Family and Community Services [2001] AATA 108, the Tribunal noted that in that case the GST had increased the cost of living and that this was reflected in more than $110.00 increase in the compensation divisor from 1 July 2000.

71. The advocate for the Respondent sought to distinguish Secretary, Department of Family and Community Services v Chamberlain [supra], from the current matter before the Tribunal, on the basis that in that case the only ground for special circumstances was the application of the '50% rule', whereas in Mr Ford's case there were other grounds as well.

(2) Incorrect advice from Centrelink

72. It was contended that the Respondent's wife was given incorrect advice from Centrelink as to the effect of any preclusion period.

73. Mrs Ford had contacted Centrelink about a fortnight prior to the settlement so that she and her husband could make an informed decision on whether to accept an offer or to continue pursuing the compensation claim. Mrs Ford's evidence has been consistent with the first written request for review on 4 September 1998 (T7). Mrs Ford also wrote a contemporaneous note of the conversation, detailing the advice she received (T17). Several times in her evidence she said she understood the starting date for the preclusion period to be from the date of the accident.

74. The Respondent's evidence was that he relied on the Department's incorrect advice and it had an impact on his decision to settle his case. As the SSAT stated at paragraph 18 of its decision, it is unfair that the Respondent was in effect denied the opportunity to consider his options with full and accurate knowledge of the facts (T2, p8).

75. The Tribunal was also referred to paragraph 8 of the SSAT's decision which referred to Centrelink's policy during December 1997 to March 1998, at chapter 37.5320 of the Guide to the Administration of the Act (T2, p5)

76. The advocate for the Respondent also referred the Tribunal to the letter of 7 May 1998 (Exhibit R3) and submitted that it was reasonable for the Respondent to rely upon that letter. In addition, it was not until August 1998 that the Respondent was formally advised that his preclusion period would end on 12 December 2001 (T6), some four months after the insurer's initial advice to Centrelink (T4). Following Mr Ford's letter to Centrelink dated 4 September 1998 (T7), the preclusion period was increased to 30 October 2002 (T11).

77. It was submitted that it was unknown what might have been the Respondent's financial decisions, had he been aware of his preclusion period from the outset.

(3) Financial hardship

78. The Respondent currently receives partner allowance in accordance with the SSAT decision. It was submitted that if he were not receiving this allowance then he and his wife would be in severe financial hardship. Their only other source of income is Mrs Ford's disability support pension of $352.10 per fortnight. Their sole assets are their modest home, superannuation and 1000 NRMA shares.

79. It was contended that it would be unfair and unjust to require the Respondent to dispose of the family home and use the proceeds of the sale of the house for his living expenses to the end of the preclusion period. This is particularly the case as the land and house were purchased with the savings he and his wife had accumulated prior to the Respondent's accident.

80. they can obtain a loan over the house; whether the house is modest and if it feasible to purchase a less expensive dwelling; and the consequent stress on the family if forced to sell.

81. As was noted by the Tribunal in Nikolov and Secretary, Department of Social Security (AAT 7452, 11 July 1991), in other sections of the Act the family home is treated separately and does not require forced sale to provide income. This is particularly relevant in this case as the Respondent had the funds to purchase the land and house prior to the accident and receipt of compensation.

82. It was contended by the Respondent that it would be unreasonable to force the Respondent to access the remaining $25,000 in his superannuation funds. These funds are to help provide for Mr and Mrs Ford in retirement. The Respondent is also concerned that he may require further medical treatment in the future and need to access those funds for that purpose.

(4) Ill health

83. It was contended that both the Respondent and his wife's poor health and inability to take up employment are relevant special circumstances. The Respondent continues to be in poor health since his accident and is unable to take up employment. Mrs Ford is also in poor health and unable to work. Mrs Ford's depression is exacerbated by stress and the uncertainty of their financial circumstances has led to considerable stress.

84. In summary, it was submitted on behalf of the Respondent that, when considered in their entirety, the Respondent's circumstances are special within the meaning of section 1184(1) of the Act and that it is appropriate to reduce the preclusion period.

DISCUSSION AND FINDINGS

85. In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.

86. Following settlement of a compensation claim in respect of a work accident, the Respondent received a lump sum payment which was compensation as defined in section 17 of the Act. The total sum awarded to the Respondent before any deductions was $250,000.

87. It is not disputed that a sum of $94,147.22 was refunded to the insurer from the lump sum compensation, of which only $56,905.81 of the total refund was deductible pursuant to section 17(4) of the Act as 'repaid periodic compensation payment'. The balance of the refund comprised payments such as for medical expenses, which, at the time of notification to Centrelink by the insurer, were not deductible. Consequently, the lump sum compensation payment used in the calculation of the new lump sum preclusion period is $193,094.19.

88. Pursuant to section 17(3) of the Act, the compensation part of the lump sum is 50 per cent of the lump sum, which amounts to $96,547.09. There was no dispute that, if the statutory formula was applied to the Respondent's circumstances, a preclusion period would result from 2 April 1998 to 30 October 2002.

89. It was the Department's position that, contrary to the finding of the SSAT there are no special circumstances in the Respondent's case such that the discretion to disregard parts of the compensation payments pursuant to section 1184(1) of the Act should be exercised.

90. The Respondent contended that there are special circumstances on a number of bases and the Tribunal considered each in turn.

(1) Unfairness of the strict application of the '50% rule'

91. It was submitted for the Respondent that there are a number of factors in Mr Ford's case that make the strict application of the '50% rule' in calculating a preclusion period so unfair, that the Tribunal should use its discretion pursuant to section 1184 of the Act to shorten the preclusion period

92. The Tribunal found that the application of the formula resulted in the compensation assessed at roughly equivalent to the net compensation amount the Respondent actually received, whereas the actual amount for all economic loss was about $30,000 less than the amount applied by Centrelink. The SSAT calculated that a preclusion period based on the actual amount would have ended in about May 2001.

93. The Tribunal reviewed the decision in Kirkbright v Secretary, Department of Family and Community Services [supra] where Mansfield J, said that section 1184 is designed specifically to enable the Department to ameliorate such unfairness or injustice which results upon the strict application of the Act.

94. The Tribunal found that while Mr Ford was charged high solicitors' costs he had agreed to those costs pursuant to a costs agreement and should have taken those costs into account in considering what he might ultimately obtain from the settlement. The evidence was that Mr and Mrs Ford were concerned about escalating costs and this was a factor in deciding to settle the matter.

95. It was submitted that had the Respondent gone onto social security payments instead of remaining on compensation payments he would have been in a better position financially and by the time of settlement the preclusion period would have almost been over. There was no direct evidence to this effect but the advocate for the Department did not demur from this contention. In addition, the Respondent may have had the benefit of a HealthCare card, thereby reducing medical expenses.

96. The advocate for the Respondent had submitted that as there had been changes in the compensation divisor used to calculate preclusion periods, and the Respondent received a lump sum compensation at that particular time, a much longer preclusion period was imposed on the Respondent than that imposed on others who received compensation about 12 months before, or 18 months after, the date of Mr Ford's settlement.

97. The advocate for the Respondent relied on Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 where, even though a factor applied to all, or a substantial part, of the community, it was not necessarily excluded in considering if a person's circumstances were "special". In Stephens and Department of Family and Community Services [2001] AATA 108, the Tribunal noted that in that case the GST had increased the applicant's cost of living and this was reflected in the increased divisor from the time of the introduction of GST.

98. In Secretary, Department of Family and Community Services v Chamberlain [supra], upon which the Department had relied, the application of the '50% rule' was the only ground considered by the Federal Court. It was clear to the Tribunal from the decision that there were other possible factors which had not been taken into account. To that extent, the Tribunal agreed with the submission of the Respondent that the case could be distinguished.

99. The Tribunal was asked to distinguish Secretary, Department of Family and Community Services v Allan [supra] because in that case the GST issue was only one of the unfortunate circumstances in the case and there was a very long preclusion period. In the Tribunal's view, however all factors, including the effect of the wide-impact GST were factors to be considered in whether it is appropriate for the discretion to be used where the arbitrary nature of the '50% rule' results in unfairness.

(2) Incorrect advice from Centrelink

100. It had been contended on behalf of the Respondent that Mrs Ford was given incorrect telephone advice by Centrelink as to the effect of any preclusion period.

101. Although it was the Department's position that it had no record of Mrs Ford contacting Centrelink to inquire about compensation payments, the Tribunal accepts that Mrs Ford contacted Centrelink at some time prior to the settlement. This was with a view to making an informed decision on whether to accept the settlement offer or to continue pursuing the compensation claim.

102. The Tribunal was also referred to paragraph 8 of the SSAT's decision which referred to Centrelink's policy during December 1997 to March 1998, at chapter 37.5320 of the Guide to the Administration of the Act, which states:

"where an earlier payment of compensation, including periodic payments and medicals, is reimbursed from a subsequent lump sum payment and the 50% rule is applied to the net amount of the lump sum (see subsection 17(4)). This policy was later amended in March 1998 to exclude medical paybacks."

103. The Tribunal finds the change, which excludes the medical expenses, occurred at about the same time Mrs Ford was inquiring about the compensation payments. Her account of the advice provided was consistent with her inquiries having been made prior to the change, or before the person to whom she spoke had been apprised of that change.

104. The Tribunal accepts that the Respondent relied at least partially, on the Centrelink advice about the expenses to be deducted and it had an impact on his decision of whether or not to settle his case.

105. The SSAT found, at paragraph 18 of its decision, it was unfair that the Respondent was denied the opportunity to consider his options with full and accurate knowledge of the facts and the Tribunal agrees with this view (T2, p8).

106. The advocate for the Respondent also referred the Tribunal to the letter of 7 May 1998 (Exhibit R3) and submitted that it was reasonable for the Respondent to rely upon that letter. The Tribunal agrees with this view and once more finds that the Respondent had been denied the opportunity to consider his position with full and accurate knowledge of the facts.

107. In addition, it was not until some four months after Centrelink became aware of the settlement that it first formally notified the Respondent as to a preclusion period. Following his query on 4 September 1998 (T7) the preclusion period was increased to 30 October 2002 (T11).

108. The advocate for the Department submitted, to the effect, that the Respondent had not acted upon the various advice provided and had merely continued upon his long-term goals of building his own home and of preserving his savings. However, the Tribunal agrees with the submission on behalf of the Respondent that it was unknown what might have been the Respondent's financial decisions had he been aware of the length of his preclusion period from the outset. By receiving erroneous information on at least two, and possibly three, previous occasions, the Respondent was not, until October 1998 in a position to make a decision based upon accurate information.

109. For the reasons given below, it was not necessary for the Tribunal to decide if the erroneous information alone amounted to special circumstances.

(3) Financial hardship

110. To qualify as "special circumstances", financial hardship must go beyond "straitened" circumstances and be truly exceptional. The Department contended that the Tribunal should decline to find special circumstances, as the Respondent has not exhausted his financial options. (Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716).

111. In Re Martin and Secretary, Department of Social Security (AAT 6482, 14 November 1990) SM Jocelyn McGirr said at paragraph 11:

"When the hardship to be caused does not amount to severe hardship, it is not sufficient to establish "special circumstances"."

112. In the Tribunal's view the evidence does not support a contention that the Respondent's circumstances are special by virtue of financial hardship alone in that his current financial position does not amount to one which is 'severe'.

(4) Ill health

113. It was contended that ill health of both the Respondent and his wife and the Respondent's inability to take up employment are relevant special circumstances. There was some evidence of continued medication and possible further surgical intervention. The Tribunal accepts that these would require substantial ongoing costs.

114. Having reviewed the authorities to which the advocate for the Department referred, the Tribunal found that Mr Ford's ill health alone is not enough to be a special circumstance, in that recipients of compensation will be likely to have ongoing health problems. Similarly, although Mrs Ford is not well, her ill health, alone, does not amount to special circumstances.

115. The Tribunal therefore came to the view that none of the Respondent's circumstances, with the possible exception in relation to the erroneous advice, amounted, alone, to 'special circumstances' for the purposes of exercising the discretion under section 1184.

116. However, in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 162, it was stated by the Tribunal that the "concept" of special circumstances was:

"to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness [in the event of a rigid application of the law]."

117. In the present case, the Tribunal finds that, considering all the Respondent's circumstances in their totality, his circumstances were 'special' within the meaning of section 1184 of the Act. As such, the Tribunal finds it appropriate to exercise the discretion under section 1184 to treat part of the Respondent's compensation payment as not having been made.

118. The Tribunal, having come to this view, turned to consider the appropriate length of the preclusion period.

119. There was no dispute that the proper commencement date was 4 April 1998. The cessation date however, could vary even from that date until sometime before the statutory cessation date of 30 October 2002, depending on what particular feature of the Respondent's 'special circumstances' the Tribunal might choose to focus. However, the Tribunal has decided that it is the totality of the Respondent's situation which amounts to special circumstances. The SSAT managed this approach by adopting an end date as the date of that hearing. While perhaps somewhat arbitrary, in all the circumstances of the case, it was not unreasonable, and the Tribunal also adopts this approach.

DECISION

120. The Administrative Appeals Tribunal affirms the decision under review.

I certify that the 120 preceding paragraphs are a true copy of the reasons for the decision herein of

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

Associate

Date of Hearing 3 April 2002

Date of Decision 20 May 2002

Advocate for the Applicant Ms H Schuster

Solicitor for the Respondent Ms J Finlay