Pickering and Department of Family and Community Services [2002] AATA 559 (9 July 2002)

Last Updated: 16 July 2002

DECISION AND REASONS FOR DECISION [2002] AATA 559

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/1491

GENERAL ADMINISTRATIVE DIVISION )

Re LYNETTE MAREE PICKERING

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr M J Sassella Senior Member

Date 9 July 2002

Place Sydney

Decision The tribunal affirms the decision under review.

[SGD] M J SASSELLA

Senior Member

CATCHWORDS

DISABILITY SUPPORT PENSION - compensation affected payments - Disability Support Pension a compensation affected payment - weekly compensation payments - dollar for dollar reduction from compensation affected payment in respect of weekly compensation payments - whether compensation should be disregarded because of special circumstances - illiquid funds, costs of medications, etc, multiple health problems, costs of household services, inability to undertake casual work as special circumstances - interaction of dollar for dollar compensation deduction and assets test - policy of dollar for dollar withdrawal rate.

Social Security Act 1991 ss 17(1) ("compensation affected payment", "periodic payments period"), 23(1) ("social security benefit"), 1161, 1173, 1175, 1176, 1184K(1).

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

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

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

REASONS FOR DECISION

9 July 2002 Mr M J Sassella Senior Member

HISTORY OF APPLICATION

1. On 28 July 1995 Lynette Maree Pickering ("the applicant") lodged with the Department of Social Security a claim for Disability Support Pension ("DSP") (T3). She was granted a DSP.

2. Records in Centrelink (the Commonwealth agency that was by then delivering social security payments on behalf of the Secretary, Department of Family and Community Services ("the respondent")) indicated that the applicant had commenced to receive periodic workers compensation payments worth $50 a week from about 14 May 1999 (T28/94).

3. On 3 May 2001 a delegate of the respondent decided to cancel Ms Pickering's DSP because her income precluded payment (T30).

4. On 16 May 2001 Ms Pickering sought to appeal against the decision to cancel her DSP (T32).

5. On 24 May 2001 the original decision-maker reviewed the decision and decided not to change it (T34). The combination of the operation of the assets test and the receipt of weekly compensation had reduced Ms Pickering's rate of DSP to nil. The matter was referred to a Centrelink authorised review officer ("ARO") (T34).

6. On 25 June 2001 the ARO affirmed the decision (T36). Reasons were provided in T37. The central reasons were as follows:

"The recent increase in the value of your assets has determined that your rate of pension is to be worked out under the assets test and this is why your otherwise fortnightly rate of pension has been reduced significantly. Since he started to receive regular compensation payments will fortnightly rate of pension as required under section 1168 of the Act, has been reduced by the fortnightly rate of periodic compensation. This is why your Disability Support Pension has been cancelled.

"Both Sickness Benefit and the Disability Support Pension are considered as Compensation Affected Payments under section 17(1) of the Act. The injury/illness for which you currently receive compensation payments occurred in 1992. You commenced to receive a CAP, by way of Sickness Benefit in April 1994. As you were not in receipt of CAP at the time of your injury/illness then your fortnightly rate of Disability Pension has been correctly reduced by the fortnightly rate of periodic compensation. It is for this reason that I agree that the correct decision has been made to cancel your Disability Support Pension. I hope this explains for you why your compensation payments are directly taken off your fortnightly rate of pension instead of being considered as income under the pensions income test."

7. On 9 July 2001 Ms Pickering lodged with the Social Security Appeals Tribunal ("the SSAT") an application for review (T38).

reviewable decision

8. On 30 August 2001 the SSAT decided to affirm the decision (T2). The SSAT noted Ms Pickering's objections to the deduction of the weekly amount of compensation on a dollar for dollar basis. She argued that no other form of income was assessed on a dollar for dollar basis. She said that compensation was assessed differently depending on whether a person was injured before or after applying for a benefit or pension. Ms Pickering had been a carer for her parents. Her father died in January 1999 and her mother died in October 2000. She bought her current home in April 2000. Ms Pickering had inherited a half share in a house and a block of land when her parents died. At the time of the SSAT hearing she had about $64,000 in financial assets. Ms Pickering was seeking to convert her periodic compensation into a lump sum. A friend who had worked at Centrelink gave evidence to the SSAT that many within Centrelink regarded the treatment of compensation payments as unfair.

9. The SSAT found that the decision to reduce Ms Pickering's pension on a dollar for dollar basis was legally correct in accordance with s 1169 of the Social Security Act 1991 ("the Act"). She was in fact entitled to payment at a nil rate.

10. The SSAT considered whether some or all of the compensation could be regarded as not received by Ms Pickering because of special circumstances. This would be in accordance with s 1184 of the Act. It took account of Ms Pickering's poor health and her financial circumstances but concluded that her circumstances could not be described as unusual, uncommon or exceptional.

"Although the cancellation of her pension had caused her some financial difficulty she has had savings to carry her through and is now in the process of selling her assets. A part pension is likely to resume. Her health is poor but this in itself is not an exceptional circumstance in the context of receipt of compensation in that most people receiving periodical compensation payments suffer from health problems. While the tribunal might have some personal sympathy for Ms Pickering's argument concerning the different test applied to compensation payments, it is not appropriate to use the special circumstances provision of the Act to go behind the explicit legislative intent of section 1168 of the Act. The tribunal concluded that there are no special circumstances which would allow the receipt of weekly payments of compensation to be disregarded."

11. On 28 September 2001 the applicant lodged with the Administrative Appeals Tribunal ("the tribunal") an application for review of the SSAT's decision (T1).

RELEVANT LEGISLATION

12. The following provisions of the Social Security Act 1991 are relevant: ss 17(1) ("compensation affected payment", "periodic payments period"), 23(1) ("social security benefit"), 1161, 1173, 1175, 1176, 1184K(1).

SOCIAL SECURITY ACT 1991

Compensation recovery definitions

17.(1) In this Act, unless the contrary intention appears:

...

compensation affected payment means:

...

(a) a disability support pension; or

...

(c) a social security benefit; or

...

periodic payments period means:

(a) the period to which a periodic compensation payment, or a series of periodic compensation payments, relates; or

(b) in the case of a payment of arrears of periodic compensation payments-the period to which those payments would have related if they had not been made by way of an arrears payment.

...

General definitions

23.(1) In this Act, unless the contrary intention appears:

..

social security benefit means:

...

(c) sickness allowance; or

...

Application of Part

1161.(1) Subject to subsections (2) to (7), payments of a compensation affected payment are affected under this Part if:

...

(b) in the case of any other kind of compensation affected payment, the compensation was received on or after 1 May 1987 and the claim for the compensation affected payment was made on or after 1 May 1987.

...

Effect of periodic compensation payments on rate of person's compensation affected payment

1173.(1) If:

(a) a person receives periodic compensation payments; and

(b) the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and

(c) the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the rate of the person's compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).

(2) The person's daily rate of compensation affected payment is reduced by the amount of the person's daily rate of periodic compensation.

(3) The reference in subsection (2) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.

(4) If:

(a) a person receives periodic compensation payments; and

(b) at the time of the event that gave rise to the entitlement of the person to compensation, the person was qualified for, and was receiving, a compensation affected payment; and

(c) the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the periodic compensation payments are to be treated as ordinary income of the person for the purposes of this Act.

...

Rate reduction under both income/assets test and this Part

1175. If the rate of a person's compensation affected payment is reduced under this Part, the reduction applies to the person's rate as reduced under the ordinary income test Module or the assets test Module of the relevant Rate Calculator.

Periodic compensation not counted as ordinary income

1176. If an instalment of a compensation affected payment payable to a person is reduced under section 1173 because of the receipt of periodic compensation payments, those payments are not to be regarded as ordinary income of the person for the purposes of a provision of this Act, other than point 1071A-4.

...

Secretary may disregard some payments

1184K.(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.

...

HEARING AND APPEARANCES

13. The tribunal convened a hearing in Sydney in this matter on 8 May 2002. Ms Pickering represented herself at that hearing. The Secretary was represented by Mr G Lozynsky of the Centrelink Advocacy and Administrative Law Team.

14. The tribunal had access to the following documents which were marked as exhibits and taken into evidence:

* Exhibit TD1 - Section 37 Statement and associated documents (exhibits T1-T38) provided by Centrelink for the respondent.

* Exhibit A1 - Applicant's written submissions dated 14 March 2002.

* Exhibit A2 - List of pharmaceuticals with the cost of each provided by Killarney Vale Pharmacy.

* Exhibit A3 - Report by Dr T G Bowers, general practitioner, 4 May 2002.

* Exhibit A4 - Report by Mr S Dudley dated 5 May 2002.

* Exhibit A5 - Undated report by Ms S Pepper, physiotherapist.

* Exhibit R1 - Respondent's statement of facts and contentions, 12 March 2002.

FINDINGS ON MATERIAL QUESTIONS OF FACT WITH REFERENCE TO THE EVIDENCE AND OTHER MATERIAL IN SUPPORT OF THOSE FINDINGS

15. The tribunal notes that the provisions in the Act cited by earlier decision-makers in this matter have been replaced by those reproduced and referred to above. This occurred with effect from 20 September 2001 in accordance with s 2(2) of the Family and Community Services Legislation (Simplification and Other Measures) Act 2001.

16. In accordance with the applicable provisions the tribunal finds that the applicant's DSP was a compensation affected payment under s 17(1) if the Act. The tribunal finds further that she was in receipt of Sickness Allowance from April 1994 until August 1995 and that Sickness Allowance is also a compensation affected payment (T37).

17. The tribunal finds that the applicant at the relevant time was in receipt of periodic compensation payments. These commenced in April or May of 1999 and continued (T28/94). These were paid in respect of "an injury she suffered and subsequent illness from October 1992" (T37).

18. The tribunal finds that s 1173(1) of the Act applies to the applicant in that:

(a) She was receiving compensation payments when the decision was made on 3 May 2001 (s 1173(1)(a)).

(b) At the time of the event precipitating the compensation payments Ms Pickering was not qualified for and receiving a compensation affected payment (s 1173(1)(b)).

(c) The periodic payments period commenced in April or May 1995 and was continuing on 3 May 2001, the date of the primary decision (s 17(1) ("periodic payments period")).

(d) Ms Pickering was receiving a compensation affected payment, DSP, in relation to days in the periodic payments period (s 1173(1)(c)).

(e) The rate of Ms Pickering's DSP in relation to those days was to be reduced in accordance with s 1173(2) of the Act (s 1173(1)).

(f) Section 1173(2) prescribes that the daily rate of the compensation affected payment was to be reduced by the amount of Ms Pickering's daily rate of compensation. This is the source of the dollar for dollar reduction principle.

(g) Section 1175 prescribes that the dollar for dollar reduction was to be carried out after allowance had been made for the effect of the income test or the assets test on Ms Pickering's DSP. The tribunal finds that this was what the decision makers have done.

19. As a matter of law that disposes of Ms Pickering's application. Without more, the decision under review would be affirmed. However, s 1184K of the Act permits account to be taken of any special circumstances that would permit the tribunal to regard the whole or part of the compensation as not having been made. The SSAT considered this issue and decided that there were no special circumstances.

20. At the tribunal hearing Ms Pickering raised a number of issues:

* Her inheritance from her parents had not been in liquid funds form. It was capital in nature. She told the tribunal, however, that the properties had now been sold. The proceeds were in the bank. She had also received lump sum compensation and her preclusion period would expire in June. She expected to resume a DSP in June 2002.

* She had lost her pensioner fringe benefits and was paying full prices for medications, rates, fares, etc.

* She considered as special circumstances the fact that her dollar for dollar compensation reduction had been added to the effects of the assets test to reduce her pension.

* She regarded the rules regarding the treatment of compensation payments as discriminatory. The discrimination was against payments accruing to a person through the compensation system.

21. In considering special circumstances Ms Pickering submitted that the tribunal should consider more than her financial position. It should consider the totality of the situation. She has numerous health problems. These include, from ex A1:

* Right shoulder injury and thoracic pain (the workers compensation condition).

* Hypothyroidism (stemming from thyroid cancer).

* Hypoparathyroidism.

* Chronic muscle compartment syndrome.

* Left shoulder injury/adhesive capsulitis.

* Lumbar disc lesions.

* Cervical pain.

* Chronic pain.

* Sleep deprivation.

* Depression/anxiety.

* Severe oesophageal reflux and hiatus hernia.

* Von Willebrand's disease (a bleeding disorder).

* Asthma.

22. Some of these conditions are serious.

23. Ms Pickering requires a number of medications and treatments not available on the Pensioner Health Benefit ("PHB") card. In ex A12 she listed physiotherapy treatments costing $45 once or twice a week, remedial massage costing $40 once a week or fortnightly, an analgesic (Paradex) costing $23 a script, Feldene anti-inflammatory gel costing $17.95 a tube, Metsal costing $9.95 a tube, Deep Heat spray costing $6.00 and Magnesium for hypoparathyroidism costing $11 every three weeks. She costed these at $3,800 a year.

24. Additional medications are Oroxine, Zoton, Aurorix, Calcium, Rocaltrol and Valium. Premarin, Panamax, Ventolin, Atrovent and Becloforte. These are covered by the PHB card but incur an excess charge. Two other medications, Hydroform cream and Eryacne gel ($11.85 and $19.90 respectively) are prescribed by a dermatologist for a skin condition and are not covered by the Pharmaceutical Benefits Scheme.

25. Ms Pickering has to travel regularly to the Royal North Shore Hospital in Sydney in connection with the thyroid problems. She drives because she cannot use public transport because of muscle disease in her legs which impedes her use of stairs and ramps.

26. She attends her general practitioner "very regularly" for monitoring. The general practitioner does not bulk bill and Ms Pickering incurs travel expenses to and from these visits.

27. Ms Pickering cannot physically maintain her garden or do housework. She pays Home Care Service to clean the house fortnightly and to mow the lawns. This costs about $800 a year.

28. Ms Pickering, in ex A1, made a number of submissions going to the policy and procedure behind the compensation provisions.

(a) Where a person is assessed under the assets test and receives only a relatively low cash payment (such as a payment of weekly compensation of $50) the assessment of this $50 should receive certain consideration and not be assessed on a dollar for dollar basis.

(b) The DSP was granted in respect of a number of conditions only a small part of which attracted the compensation payments. It is inequitable that the whole of the compensation payment is withdrawn.

(c) The inherited properties which attracted the assets test took some time to sell. During that period considerable stress resulted through not knowing when the properties would be sold. In the meantime there were outgoings on them in the way of rates, insurances, electricity supply, "dumper bins" and maintenance.

(d) Where an asset is accrued through inheritance and this affects pension in concert with the compensation payments, some allowance should be made for the pensioner's emotional loss and need to deal with the financial aspects.

29. In ex A1 Ms Pickering made submissions concerning the preclusion period that ran from 30 November 2001 to late May 2002. This reflected the award of lump sum compensation of $30,000. The tribunal noted these submissions, however any issues relating to the preclusion period are not before the tribunal as a matter of jurisdiction. This application was not in respect of a preclusion period and did not relate to a decision on the preclusion period that had been considered by the SSAT.

30. Ms Pickering's other exhibits were in support of the above arguments. Exhibit A2 was a pharmacist's corroboration of the costs of medications. Exhibit A3 was Ms Pickering's doctor's listing of her medical disabilities and required medications. Exhibit A4 was from Ms Pickering's massage therapist explaining why she requires regular massage treatment. Exhibit A5 was a confirmation by her physiotherapist that Ms Pickering attends fortnightly or more often for physiotherapy treatments.

31. Mr Lozynsky cross-examined Ms Pickering and ascertained the following:

(a) The $30,000 compensation payment was put in the bank to be used for house expenses. $15,000 remained at the date of the hearing.

(b) At present Ms Pickering lives on $900 income a month from her investments.

(c) Ms Pickering received $185,000 from the sales of the inherited properties.

(d) Ms Pickering's debts were $1,200 to her credit card provider and the rolling debts owed to providers of property utilities.

(e) Ms Pickering agreed that she copes well paying her medical expenses but she said she is careful using the expensive medications. She withdraws money from the bank to pay for these.

(f) Ms Pickering has tried casual work (about four years ago) but it produced agony. She had to see the physiotherapist as a result. Her shoulder is now worse because of failed surgery.

(g) She needs to see her doctor fortnightly for a calcium test.

32. The tribunal and the Federal Court have said the following about the requirement for special circumstances. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 Toohey J said at page 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 on the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."

This passage was largely endorsed by the full Federal Court in Beadle v Director-General of Social Security (1985) 7 ALD 670, 675.

33. The tribunal finds that Ms Pickering's circumstances do not involve the requisite degree of difference to qualify as special in accordance with s 1184K of the Act. The tribunal notes that, at the time of the hearing, Ms Pickering was in receipt of $900 a month as investment income, that she had $15,000 from a lump sum compensation payment in 2001 still in her bank account, that she had received $185,000 when the inherited properties were sold. She was in a highly favoured financial position compared to most recipients of DSP. While it is true that in at least one decision, Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745, the tribunal held that special circumstances could exist even where the applicant was not in immediate financial hardship, in that case it was found that the applicant was likely to suffer longer term financial difficulties if special circumstances were not recognised to exist. That is not the situation here. The applicant is now in receipt of ongoing payments of DSP in addition to having access to considerable liquid funds.

34. In addition, the majority of the applicant's difficulties are shared to a greater or lesser extent by many other pensioners. That is to say that it is not uncommon for pensioners to be "assets rich and income poor", to incur significant health-related costs, to suffer from multiple conditions of ill-health, to be unable to earn money to supplement unearned income or to incur additional costs (if they can find the funds) for assistance with house cleaning or maintenance.

CONCLUSION

35. The tribunal has therefore decided to affirm the decision under review. This means that there are no arrears of DSP owing to the applicant as a result of the tribunal'' dealings with the decision under challenge.

DOLLAR FOR DOLLAR REDUCTION - COMMENTS ON POLICY

36. It was fairly clear at the tribunal hearing that Ms Pickering's appeal was motivated more by a desire for a platform from which to make submissions on the inequity of the treatment of weekly compensation payments under the Act. As the tribunal has found against Ms Pickering in relation to the legal aspects of her case, the least it can do is to comment on her policy submissions.

37. The tribunal notes that Ms Pickering wrote to the Hon Mr Michael Lee, her Local Member of the Australian Parliament, on 20 September 1997 (T12) seeking his assistance to have the dollar for dollar policy changed via mention in the House of Representatives. On 8 October 1997 Mr Lee replied stating, amongst other things, that he had written to the then Minister for Social Security, Senator the Hon Jocelyn Newman, "asking her to investigate this anomaly and to consider applying a common 50 cents in the dollar reduction for both 'wage compensation' and 'investment earnings'".

38. On 27 October 1997 Senator the Hon Grant Tambling, then Parliamentary Secretary Social Security, replied on Senator Newman's behalf to Mr Lee (T17). Amongst other things he wrote:

"...the compensation recovery and preclusion provisions of the Social Security Act are intended to prevent people from receiving payment twice; once through Social Security payments, and again from compensation.

"Traditionally, the provision of income support for people injured at work has been the responsibility of employers and insurers through the workers compensation system. The compensation provisions of the Social Security Act are designed to ensure that employers and insurers meet their obligations to injured workers while allowing the Social Security system to operate as a safety net for those who do not receive compensation, or whose compensation settlements are inadequate.

"If people whose need for income support has been met by the grant of compensation were also able to qualify for Social Security assistance, this would result in the community paying twice; through compulsory insurance arrangements and by taxpayers through the Social Security system."

39. With due respect to Senator Tambling, he did not actually address the dollar for dollar withdrawal rate. Mr Lee wrote on 31 October 1997 (T18):

"Unfortunately [Senator Tambling] has failed to address the problem arising from the dollar for dollar income assessment. He has ignored my request to assess these monies on a 50-cents-in-the-dollar basis, which would make the current system more equitable".

40. It may be heartening to read Mr Lee's words but the dollar for dollar rule has been a part of the Act for many years and has survived at least one change of government.

41. This disadvantageous treatment of periodic compensation may be becoming somewhat anachronistic in that it has become clear that there may be significant macro public policy benefits in encouraging individuals to take large payments such as compensation or superannuation in the form of periodic or regular payments. Some commentators have seen periodic compensation as serving better the aim of returning the recipient to the position he or she would have occupied had the event attracting compensation not occurred. Such a development in relation to common law damages has been seen by commentators as possibly a part of the solution to the apparent problems that have recently emerged with escalating insurance premiums and denial of insurance coverage, problems seen as associated with lump sum compensation awards.

42. It is clear, however, that a change such as that suggested by Ms Pickering would put additional financial pressure on the Australian social security budget, a budget already regarded by some as unsustainable into the future.

DECISION

43. The decision under review is affirmed.

I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M J Sassella, Senior Member.

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

Associate

Date of Hearing 8 May 2002

Date of Decision 9 July 2002

Advocate for the Applicant Self

Advocate for the Respondent Mr G Lozynsky, Centrelink