Gray and Department of Family and Community Services [2002] AATA 44 (25 January 2002)

Last Updated: 30 January 2002

DECISION AND REASONS FOR DECISION [2002] AATA 44

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S2001/240

GENERAL ADMINISTRATIVE DIVISION )

Re Barbara Gray

Applicant

And Secretary, Department of Family and Community Services

Respondent

DECISION

Tribunal Mr D.J Trowse (Member)

Date 25 January 2002

Place Adelaide

Decision The decision under review is affirmed.

(signed)

Mr DJ Trowse

(Member)

CATCHWORDS

SOCIAL SECURITY - lump sum preclusion period - whether special circumstances exist so as to treat the whole or part of the compensation payment as not having been made.

Ivovic and Director-General of Social Services (1981) 3 ALN N95

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

Beadle v Director-General of Social Security (1985) 60 ALR 225

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

Social Security Act 1991 s1184(1)

REASONS FOR DECISION

25 January 2002 Mr D.J Trowse (Member)

1. This is an appeal by Mrs Barbara Gray (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 22 June 2001 which affirmed a decision of a delegate of the respondent dated 12 March 2001 to impose a pension allowance preclusion period from 14 July 2000 to 22 August 2002. In brief, the SSAT concluded that there were no special circumstances which warranted the treatment of all or part of a lump sum compensation payment received by the applicant as not having been received and thus reducing the preclusion period. The applicant maintains that the SSAT should have placed greater emphasis on the unexpected nature of her partner's unemployment and the resultant deterioration in financial circumstances.

2. The Tribunal received into evidence the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, together with ten exhibits. Additionally, the Tribunal heard evidence from the applicant. The applicant was self represented and the respondent was represented by Ms L.Odgers, an advocate on its behalf.

3. The legislation relevant to this reference is sub-section 1184(1) of the Social Security Act 1991 which reads as follows:

"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."

There is no dispute that the lump sum payment received by the applicant comes within the meaning of a compensation payment nor that the preclusion period has been correctly calculated by the respondent.

History of the Matter and Applicant's Evidence

4. The following eleven paragraphs represent a recital of the pertinent facts and the relevant evidence presented by the applicant.

5. The applicant and her partner Robert Pollitt have lived together as a couple during all of the period under review. In July 1989, the applicant suffered a workplace injury when she was unwittingly exposed to a toxic chemical causing a permanent reduction of lung capacity which, according to her testimony, makes her unemployable. Also it seems that residing outside the polluted metropolitan area is medically beneficial to people with this kind of condition. Against this background, it is not surprising to find that, from 1989, the applicant and her partner rented accommodation in the Adelaide Hills township of Mount Barker. This leasing arrangement was terminated by the applicant in February 2001 when her partner became unemployed.

6. During the period July 1989 to July 2000 when settlement was reached regarding the payment of a lump sum amount of $120,000, the applicant was in receipt of regular amounts of workers compensation. It is noted that the lump sum figure included an amount reflective of economic loss and that the amount finally paid over to the applicant by her solicitor was after reductions of legal costs of $45,000 incurred in connection with the settlement and other unrelated issues and the repayment of a debt of $21,309 to Centrelink from an earlier and unconnected overpayment. The sum ultimately received by the applicant in November 2000 was approximately $54,000 which was expended, first, in the discharge of a bank mortgage on a rural property owned jointly by the applicant and her partner ($45,000), secondly, on the purchase of a stud bull for the rural property ($5000) and the balance on personal items.

7. Correspondence before the Tribunal indicates that the solicitors acting for the applicant in the settlement of the compensation claim made contact with Centrelink regarding the extent of the consequential preclusion period and that Centrelink communicated the required information by separate letters to both the solicitor and the applicant. While acknowledging that she was aware of the preclusion period, the applicant denies ever receiving the letter forwarded to her at the Mount Barker address.

8. The rural property, which consists of 130 acres and is located in the Barossa Council area, was purchased by the applicant and her partner in November 1992 for a consideration of $105,000. The acquisition was partly funded by way of a bank mortgage of $80,000 bearing interest at the annual rate of eight percent. The plan was for a cattle stud to be established on the property by a partnership consisting of the applicant and her partner, and that, upon her partner's voluntary cessation of employment in ten to fifteen years, the sale of progeny from that activity would fund their retirement.

9. The improvements on the property consist of a transportable home, implement shed, cattle yards, extensive fencing, two bores, a dam and windmill. Since the discharge of the mortgage ex the lump sum compensation payment, the property remains unencumbered. A recent valuation by an officer of the Valuer-General places an overall value on the property of $170,000 with $75,000 being applied to the home plus curtilage. Also, it is notable that the applicant and her partner have resided in the transportable home since the termination of the lease of the Mount Barker property in February 2001 and that the rural property is incapable of subdivision.

10. The assets of the grazing partnership comprise the following items which are shown at values arrived at by the office of the Valuer-General:

"Cattle - various $10,000

Motor vehicles and plant

1985 Nissan 4 Wheel Drive $2000

1997 Ford Lazer - unregistered $8000

1998 Corolla - subject to hire purchase $10,000

Tractor $5000

Sundries $1000

$26,000

The hire purchase debt attaching to the Corolla is in the vicinity of $3000.

11. Clearly, the operations of the partnership have been cash negative throughout the whole of the period since formation. Indeed, an examination of the 1997 partnership income tax return, evidently the last one prepared, reveals a business income of $1192 against expenses of $39,553.

12. The circumstances of the partner's unemployment are now considered. For the period of seventeen years prior to February 2001, the partner was engaged in the security industry, first as an employee and then as the managing director of a limited company under his control and which held a licence granted by a well known security firm to render services to clients within defined locations. It seems that a change from the licensing of rounds to that of franchising was alienating and that this was so notwithstanding an undertaking that licence holders were to have the first right of refusal for a franchise. According to the applicant, it was the inflated consideration payable for the granting of the franchise which resulted in her partner's refusal of the offer. On this same issue the Tribunal observes that the partner's letter of resignation dated 30 January 2001 makes no complaint of the amount required to purchase a franchise, rather, the termination appears to be founded on a reduction of clientele and profitability. Also, it is important to record that the change in business structure was somewhat protracted and that the yearly licensing arrangement with the partner's company had lapsed on the 17 March 2000 and been replaced by one to operate on a week to week basis. Notwithstanding that apparent limitation, the applicant, in reliance of verbal assurances given, was firmly of the view that, as at the time of repaying the mortgage in November 2000, her partner's employment position was fully protected.

13. Excluding several days of causal work, the partner has been unemployed since February 2001. From that time, he has been entitled to receive Newstart allowance of $328.90 per fortnight. Ensuing from that unemployment, the partner is undergoing a re-training program at TAFE where he is taking a course in viticulture. Hopefully, the successful completion of this study will lead to an engagement in the wine industry.

14. Given the events outlined, one is not surprised to find the applicant and her partner in difficult financial circumstances. Statements tendered at the hearing show that the Newstart allowance being received by the partner is insufficient to meet normal household and motor vehicle expenditure, let alone the outgoings associated with the property and the business being conducted on it. Monetary survival to this stage is due to the generosity of family members who have advanced various sums totalling $4500 and the reluctance of the applicant's bank to recover bankcard outstandings of about $4700. Additionally, there have been occasions when the applicant has found it necessary to obtain food from St Vincent de Paul.

15. The applicant's comments to the suggestion that assets be realised to alleviate the financial crisis are germane to the matter in issue. Her reply was two-fold - first, that any disposal would stifle her partner's ambition and passion to develop and successfully operate a cattle stud and, secondly, that the sale of cattle prior to the attainment of the desired genetic condition was to overlook their future potential.

16. In addition to an acceptance of the foregoing as the relevant facts falling for consideration, the Tribunal makes the following supplementary findings:

* that the applicant was fully aware of the existence of the preclusion period and its implications when she repaid the mortgage on the rural property;

* at that same point in time, the probability is that the applicant believed her partner's employment to be reasonably secure, and;

* that the mortgage repayment was effected after consultation with a financial adviser and was motivated by the attraction of overcoming the need to pay interest at a relatively high rate.

Consideration of Issues

17. The term 'special circumstances' has been considered by the Tribunal on a number of occasions including Ivovic and Director-General of Social Services (1981) 3 ALN N95 and Beadle and Director-General of Social Security (1984) 6 ALD 1. In Ivovic the Tribunal at paragraph 45 stated:

"The reference to special circumstances 'by reason of which' a person liable 'should be released' requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes...Thus whilst keeping the dominant principle of s115 in mind, he [the Secretary] must nevertheless be prepared to respond to the 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." (emphasis added)

In Beadle the Tribunal further elaborated at p.3 where it said:

"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.' (emphasis added)

It is significant to observe the general approval of the above passage by the Federal Court in the case of Beadle v Director General of Social Security (1985) 60 ALR 225. Also, it should be acknowledged that, whilst the relevant legislation pertaining to those earlier matters was expressed in different terms, the applicability and net effect remain the same.

18. The Tribunal is of the view that financial hardship of itself does not ordinarily represent special circumstances and, by way of authority, refers to the Tribunal decision of Beadle supra. However, it is accepted that the existence of exceptional hardship is a factor to be considered in a determination of this kind and that, in the process, regard must be had to the particular circumstances out of which the alleged hardship is said to have arisen. Notwithstanding the foregoing, it appears there will be instances where the financial hardship may be so unusual and severe as to constitute a special circumstance, see for example the Federal Court decision in Secretary, Department of Social Services v Ellis (1997) 46 ALD 1.

19. The question to be addressed by the Tribunal is whether, when the relevant circumstances of the applicant are looked at in their entirety, they may fairly be described as unusual, uncommon or exceptional so as to warrant the payment of an allowance earlier than the date from which it would ordinarily be paid.

20. The factors identified by the applicant as relevant to her claim for special circumstances are - the unexpected curtailment of her partner's income earning activities - the state of her health and the need to reside in an unpolluted environment - and her straitened financial position. Those matters are now considered.

21. The loss of employment, albeit at the partner's choice, is undoubtedly at the core of the applicant's financial problems. It seems probable that, had the income earning activities continued unabated, the extensive overheads associated with the rural property and the running thereof could have been satisfied. However, the question to be asked is whether the loss of one's position is exceptional by current standards. It is an unfortunate fact that operational changes within industry have caused the unemployment of many long serving employees/sub-contractors who, as a result, have been forced to alter their lifestyles and aspirations. There is nothing of substance to distinguish the partner's curtailment from others in the same position and thus the adverse conclusion that there was nothing unusual, uncommon or exceptional about that event.

22. It is accepted that the medical condition currently suffered by the applicant is related to the workplace injury that resulted in the compensation payment and which, in turn, initiated the imposition of the preclusion period. Against that background, it seems appropriate to compare her position with other injured workers who have been compensated and are subject to preclusion periods. The Tribunal is not able to perceive any circumstance that would lead to a conclusion that this applicant should be treated any differently from others similarly placed. The inference that the preclusion period would cause the applicant to re-locate to a polluted area is speculative. Indeed, there is nothing before the Tribunal to support such an outcome.

23. On the subject of financial need, one commences with the observation that, at the crucial time of applying the amount of income substitution, ie the compensation payment, towards the mortgage repayment, the applicant was well aware of the consequences of that action. Not only had she received professional advice as to the application of those funds, the applicant had also been told of the preclusion period and its effect upon her situation. Notwithstanding that instruction and the circumstances of her partner's employment, the applicant ventured to make the payment rather than preserve the receipt for the intended purpose of income maintenance.

24. It is accepted that the financial position of the applicant is dire and, yet, the means of rectification are squarely in the hands of her partner and herself. The net value of assets under their joint control exceeds $200,000 and, in the circumstances outlined, it seems that the retention of the present asset structure is both uneconomic and impractical. The emotional attachment to the property was obvious and their reluctance to entertain the prospect of sale understandable. However, the Tribunal must take into account all of the various assets in deciding whether the applicant is in a position of exceptional financial hardship. While the applicant has assets of such value she can never be so regarded. Neither, in the Tribunal's view, should the applicant expect the taxpayers of Australia to support her while she holds appreciable assets that could be realised upon and the proceeds applied towards her own support.

25. The Tribunal has considered the entirety of all of the relevant circumstances of the applicant and finds that they do not answer the description of being unusual, uncommon or exceptional. Moreover, the Tribunal finds that such a decision does not produce a result which is unjust, unreasonable or otherwise inappropriate.

Decision

26. For the reasons stated, the Tribunal decides that special circumstances do not exist to warrant an exercise of the discretion contained in s1184(1) of the Act and accordingly affirms the decision under review.

I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Mr D.J Trowse (Member)

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

Associate

Date/s of Hearing 9 November 2001 and 15 November 2001

Date of Decision 25 January 2002

Counsel for the Applicant In person

Solicitor for the Applicant -

Counsel for the Respondent Ms Odgers

Solicitor for the Respondent Centrelink