Simms and Secretary, Department of Family and Community Services [2002] AATA 489 (21 June 2002)

Last Updated: 24 June 2002

DECISION AND REASONS FOR DECISION [2002] AATA 489

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2001/1172

GENERAL ADMINISTRATIVE DIVISION )

Re ROSS SIMMS

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr B J McCabe, Member

Date 21 June 2002

Place Brisbane

Decision The Tribunal affirms the decision under review.

..................(Sgd)............................

Mr B J McCabe

Member

CATCHWORDS

SOCIAL SECURITY - preclusion period - compensation payment - whether special circumstances exist

Social Security Act 1991

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

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

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

Re Secretary, Department of Social Security and VXY (AAT 8559, 3 March 1993)

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

Re Mosarevski and Secretary, Department of Social Security (AAT 10714, 2 February 1996)

Re Secretary, Department of Social Security and VXY (1995) 40 ALD 745

Re Secretary, Department of Social Security and Weeks (AAT 7174, 16 July 1991)

Director-General of Social Services v Hales (1992) 47 ALR 281

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

Secretary, Department of Social Security v Ellis (1997) 24 AAR 535

Secretary, Department of Social Security v Thompson (1994) 53 FCR 580

Re Secretary, Department of Social Security and Galea (AAT 9081, 28 October 1993)

Re Secretary, Department of Social Security and Ah Sam (AAT 9699, 25 August 1994)

Secretary, Department of Family and Community Services v Allan [2001] FCA 1160

REASONS FOR DECISION

21 June 2002 Mr B J McCabe, Member

Introduction

1. Mr Ross Simms received a payout from his former employer in settlement of a claim in respect of a workplace injury. Under s 17(3) of the Social Security Act 1991, 50% of the payment is deemed to have been made in respect of future economic loss. Section 1165 of the Act requires the respondent to calculate a preclusion period. The applicant is not eligible to receive a compensation affected payment prior to the end of the preclusion period. The expression "compensation affected payment" includes a disability support pension.

2. The Social Security Appeals Tribunal (the SSAT) concluded by a majority there were no special circumstances that would justify exercising the discretion in s 1184 (now s 1184K) to reduce the preclusion period (ie, the period within which a person was ineligible to receive assistance from the respondent). A single member concluded that the introduction of the New Tax System may have resulted in hardship that amounted to special circumstances within the meaning of the section. That member would have allowed a reduction in the preclusion period.

3. Mr and Mrs Simms appeared at the hearing before the Tribunal in Gladstone. They were not legally represented. There was no dispute over the calculation of the preclusion period. Mr Simms argued that the Tribunal should shorten the preclusion period because of special circumstances within the meaning of s 1184.

The Facts

4. Mr Simms is now 63 years of age. He worked for TNT until 1998. He was a manager. In or around 1995, he was given responsibility for establishing a new security transport service. Mr Simms does not speak highly of his former employer: he says he was not given proper support, and he was required to meet unrealistic performance targets. He was injured at work on 20 July 1995 doing heavy lifting work that would not normally form part of his employment. He suffered a series of health problems and endured two painful operations on his neck before he was "invited to resign" in 1998. He sued his former employer in respect of his injuries and agreed to a settlement in the amount of $165,000 on 28 June 1999.

5. The lump sum preclusion period calculated under s 1165 was 197 weeks. Mr Simms is therefore not eligible to receive a compensation-affected payment until 6 April 2003.

6. Mr Simms gave evidence at the hearing. He indicated that he had problems with his memory because of the medication he was taking. Mrs Simms was prompting him, so I had her sworn in as well. Mr Simms said that the terms of the settlement were explained to him in court prior to the settlement. Mrs Simms was also present in court, as were the applicant's solicitor and barrister. Mr Simms says he remembers very clearly that the solicitor and barrister explained to him the concept of a preclusion period. Importantly, he said that he was told that the preclusion period would be 143 weeks. Mr Simms said he remembered the barrister working out the length of the period on a calculator. The applicant said he remembered the judge mentioning the period of 143 weeks as well, although he conceded under cross-examination that he did hot have a clear recollection of the judge saying anything. Mrs Simms says she remembers the judge mentioning "143 weeks" although she was not aware until talking to her husband some time later what the judge was discussing.

7. Mr Simms says he was very unhappy with the settlement. He felt he had been short-changed by at least $40,000. But he accepted it. He purchased a caravan out of the settlement monies and set out on a trip around Australia. The couple had decided to find an area in which they would like to spend their retirement. They did not own a house at that point, as they had rented. They decided Yeppoon would be an attractive place to live and purchased a block of land and began building a house. Mr Simms said the house is a modest one and was built within the limits of the money available to them. They made savings in the building process - by not building a garage, for example.

8. Mr Simms estimated the house was worth about $115,000. His estimate was based on the cost of buying the land and building the house (ie, replacement cost) rather than its market value. He suggested that the house may be less valuable than other houses in the area because it did not have a garage. Under cross-examination, the applicant conceded the house may be worth $130,000.

9. The applicant says he and his wife had around $40,000 left after the house was completed. They owned a caravan, some Telstra shares and a car. The car was a 1994 Ford Falcon that had been Mr Simms's company car at TNT. He purchased it from the company. Mr Simms said the couple had carefully managed their finances so they could survive until the preclusion period ended after 143 weeks (or 149 weeks - there was some confusion on this point). They calculated that their money would run out around April or May 2002 - at which point Mr Simms would be eligible to apply for social security assistance.

10. Mr Simms learned the truth about the length of the preclusion period when visiting Centrelink with his wife. Mrs Simms was inquiring about her eligibility for an aged pension. Mr Simms was angry: he said he had been led to believe that the preclusion period was 143 (or 149) weeks, not 197 weeks. He said it was not the first time that he had told Centrelink officers about his understanding of the length of the preclusion period. He said he was surprised that none of the officers whom he had spoken with had ever performed the calculation and told him the true position.

11. The applicant and his wife say they were dismayed to learn that they would have to last for close to another year on the money they had budgeted to last until around May 2002. They say they have around $4,000 in the bank. They sold the Telstra shares and the caravan to cover a $13,000 credit card debt. Neither Mr or Mrs Simms are able to work because of the state of their health. The applicant says he and his wife are living off his wife's aged pension.

12. Mr Simms had some difficulty giving evidence. He was emotional. He appeared to be in some pain. He said that he took morphine and other painkillers on a regular basis. His memory was also imperfect. I thought it appropriate to treat his testimony with caution. Mrs Simms' testimony did not add much. It was clear that both the applicant and his wife are dissatisfied with their treatment.

The Law

13. The discretion to provide relief by effectively shortening the preclusion period is contained in s1184 (now s1184K). The section provides:

"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."

14. The expression "special circumstances" has been considered in a number of cases. In Re Beadle and Director-General, Department of Social Security (1984) 6 ALD 1 at 3, Toohey J said the circumstances in question must be "unusual, uncommon or exceptional". On appeal, the Full Court said that "...special circumstances in this context must include events which would render the [strict application of the rule in question] unfair or inappropriate": Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228 per Bowen CJ, Fisher and Lockhart JJ.

Application to the Facts

15. The cases have recognised a range of situations in which special circumstances have been found. The applicant appears to rely on:

(a) the incorrect legal advice provided by the solicitors (an error compounded by Centrelink, he says)

(b) financial hardship;

(c) ill-health; and

(d) the impact of the introduction of the New Tax System.

as evidence justifying a finding of special circumstances. I will deal with each claim in turn.

(a) Incorrect Advice

16. The applicant says his lawyers gave him incorrect advice about the length of the preclusion period. The applicant says he trusted his solicitor when he was told that the preclusion period was 143 weeks. But he also concedes the solicitor told him to approach Centrelink once the settlement took place. The applicant did so, but only in connection with his wife's affairs. He says he mentioned to a Centrelink officer on at least one occasion that he was affected a by a preclusion period of 143 weeks. No-one corrected him.

17. The Tribunal has been largely unsympathetic when considering claims that legal advisers have failed in their duty to give proper advice about the preclusion period. Deputy President Todd explained in Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464:

"Overall, this factor is not persuasive or determinative and the best view is that the matter is one, if at all, as between solicitor and client."

18. That view has been repeated in a number of cases, including Re Secretary, Department of Social Security and VXY (AAT 8559, 3 March 1993) and Re Martin and Secretary, Department of Social Security (AAT 6482, 14 November 1990). The Tribunal has suggested the proper remedy for defective legal advice was a complaint and action for damages against the lawyers in question: see, for example, Re Mosarevski and Secretary, Department of Social Security (AAT 10714, 2 February 1996). The taxpayer should not be required to compensate an applicant for a mistake made by his or her solicitors if a case can be made against the solicitors.

19. While the Tribunal has taken a different view in a small number of cases (see, for example, the decision of Senior Member Dwyer in Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745), I am satisfied there is no basis for a finding of special circumstances in this case.

20. Mr Simms did not receive any written advice from his solicitors about the preclusion period. Assuming that his memory on this point is sound, the circumstances in which he saw his legal adviser perform the calculation suggest that it was a hurried, preliminary calculation that required confirmation. I am surprised given his background (as he described it) as a senior manager with extensive business experience that he would rely on oral advice in the circumstances. Given the difficulty Mr Simms had in giving evidence and his faulty recollection (he confidently asserted that the judge had nominated the figure of 143 weeks before conceding during cross-examination that his recollection was based on his wife's comments), I am not satisfied the confusion was induced by the solicitors.

21. I am not satisfied that Centrelink contributed to the confusion either. The mere fact that Centrelink officers did not investigate the applicant's casual references to his understanding of the preclusion period does not suggest a want of diligence or failure of duty on the part of Centrelink. The applicant appeared to regard Centrelink's failure to warn him of the true position as an inexcusable example of the left hand not knowing what the right hand is doing. But there was no reason for Centrelink officers to examine the applicant's position in the absence of a formal request from him. He did not make such a request until some time after the settlement occurred and he had completed his budget. Indeed, as a matter of public policy, there are good reasons why Centrelink officers should not know the private circumstances of those with whom it does not deal.

22. This approach is consistent with the Tribunal's decision in Re Secretary, Department of Social Security and Weeks (AAT 7174, 16 July 1991). In that case, the Tribunal concluded that the department's failure to advise an individual of his position was attributable to his failure to provide the department with the information it required to provide the advice. The Tribunal said there were no special circumstances present in that case.

(b) Financial Hardship

23. It was clear from the material provided in the T-documents (such as the statement of financial circumstances provided to Centrelink dated 31 May 2001) and the applicant's oral evidence that Mr Simms and his wife are in some financial difficulty. Mr Simms pointed out that he and his wife had enjoyed a relatively good standard of living when he was employed and he had earned a healthy salary as a manager. He said it was very difficult being reduced to surviving on his wife's meagre benefits. The couple have already been forced to liquidate some assets (the caravan and the shares) to pay off debts. They are left with their house, which is unencumbered. There was no suggestion that the house is anything but modest. They have a small amount of cash in the bank.

24. The cases with respect to financial hardship acknowledge that almost everyone coming before the Tribunal in a case like the present will be in straitened circumstances: Director-General of Social Services v Hales (1982) 47 ALR 281 at 321 per Sheppard J. It is not enough for the applicant to show that he is under financial pressure: see, for example, Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 at 699-700; see also Secretary, Department of Social Security v Ellis (1997) 24 AAR 535 at 539-540 per Carr J. The circumstances must make the burden unusual or extreme. I am not satisfied there is anything unusual in the applicant's circumstances that would set his case apart from other recipients of income support.

25. The applicant and his wife have chosen to "lock-up" the settlement monies in a house as part of a lifestyle choice. It is the first house they have owned as a couple. I am not aware of any circumstances that would make it inappropriate to sell the house should it become necessary to do so. They have rented in the past. The settlement monies provided them with an opportunity to own a home together for the first time, but that is not an end in itself. It might be a pity for them to sell the property, but it is not an eventuality that justifies the intervention of the Tribunal in the circumstances.

(c) Ill Health

26. The applicant's ill health (or, for that matter, the ill health of someone else) may amount to special circumstances: see, for example, Secretary, Department of Social Security v Thompson (1994) 53 FCR 580 at 586 per Einfeld J. Mr Simms is clearly in poor health (and considerable pain) as a consequence of his accident. But that is hardly unusual for a recipient of a settlement. The cases suggest that something more is usually required. For example, in Secretary, Department of Social Security and Galea (AAT 9081, 28 October 1993), the Tribunal shortened the preclusion period so that Mr Galea would not be forced to sell his home and resume a pattern of heroin abuse. To similar effect the Tribunal decided in Secretary, Department of Social Security and Ah Sam (AAT 9699, 25 August 1994) that the applicant's unexpected renal failure amounted to special circumstances. I was unable to identify any features of his health that might make the length of the preclusion period particularly onerous for the applicant in this case. I am not persuaded that Mrs Simms' health makes any difference: while her health is also poor, without more it is unclear why the preclusion period should be shortened.

(d) The Impact of the Introduction of the New Tax System

27. The Federal Court had recognised the possibility of increases in the cost of living caused by the introduction of the New Tax System (most obviously, the introduction of the GST) amounting to special circumstances in Secretary, Department of Family and Community Services v Allan [2001] FCA 1160. The dissenting member of the SSAT in this case concluded that the introduction of the New Tax System amounted to special circumstances. The majority of the SSAT briefly considered the argument but rejected it.

28. As part of the changes introduced in the New Tax System, the divisor used for the calculation in s 1165 was increased substantially so that recipients of a settlement after 1 July 2001 would be treated more generously to compensate them for the increased costs associated with the GST. But persons who received settlements prior to that date did not automatically have their preclusion periods adjusted to take into account the effects of the tax.

29. Mr and Mrs Simms did not refer me to specific examples of how the introduction of the GST has imposed an unusually heavy burden upon them. I am prepared to assume that their cost of living has increased, but there was no evidence that the cost of living had increased for them in particular, so as to set their case apart from other people whose preclusion periods spanned the introduction of the New Tax System.

Conclusion

30. I have a great deal of sympathy for Mr and Mrs Simms. They are obviously distressed by the circumstances in which they find themselves. But sympathy alone does not justify me in exercising the discretion in s 1184, which is necessarily reserved for the hardest cases. Accordingly, I affirm the decision of the SSAT.

I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member

Signed: Denise Burton

Administrative Assistant

Date of Hearing 14 May 2002

Date of Decision 21 June 2002

The Applicant Appeared in Person

Solicitor for the Respondent Mr McQuinlan, Departmental Advocate