Walker and Department of Family and Community Services [2002] AATA 71 (7 February 2002)

Last Updated: 11 February 2002

DECISION AND REASONS FOR DECISION [2002] AATA 71

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/535

GENERAL ADMINISTRATIVE DIVISION )

Re CHARMAINE WALKER

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date 7 February 2002

Place Wollongong

Decision The Administrative Appeals Tribunal affirms the decision under review.

[SGD] Ms N Isenberg

Member

CATCHWORDS

Social Security - lump sum preclusion period - compensation settlement - whether special circumstances exist

LEGISLATION

Social Security Act 1991 - sections 17, 1163, 1165 and 1184(1)

CASE LAW

Re Sales and Secretary, Department of Family and Community Services [1999] AATA 963

Re Secretary, Department of Social Security and Beel (1995) 38 ALD 736

Secretary, Department of Social Security v Banks (1990) 23 FCR 416

Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152

Secretary, Department of Social Security v Smith (1991) 30 FCR 56

Re Secretary, Department of Social Security and McFetrish [1998] AATA 367

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

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

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

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

Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349

Department of Social Security v Hales (1998) 82 FCR 154

Harmat v Secretary, Department of Family and Community Services (2000) 4(6) SSR 73

Haidar v Secretary, Department of Family and Community Services (1998) 52 ALD 255

Re Brodley and Secretary, Department of Social Security (1991) 63 SSR 878

Re Secretary, Department of Social Security and Hill (1995) 2(1) SSR 9

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

REASONS FOR DECISION

7 February 2002 Ms N Isenberg, Member

THE APPLICATION

1. This is an application by Charmaine Walker ("the Applicant') for a review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 21 March 2001 which affirmed a decision of a delegate of the Secretary of the Department of Family and Community Services ("the Respondent") dated 8 September 2000, to impose a preclusion period from 3 February 1999 to 9 January 2001 and recover $6622.83 from the Applicant's compensation settlement in respect of Social Security benefits paid during that period. The earlier decision was reviewed and affirmed by an Authorised Review Officer on 24 November 2000.

APPEARANCES

2. At the hearing, the Applicant was represented by her solicitor, Anthony Williamson, and the Respondent was represented by John Kenny of Centrelink.

DOCUMENTARY EVIDENCE

3. The evidence before the Tribunal comprised the documents lodged pursuant to section 37 of the Administration Appeals Tribunal Act 1975 ("the T Documents") and the Statement of Facts and Contentions of each party (Exhibits A1 and R1 respectively). The Applicant's Statement of Facts and Contentions contained a number of annexures. A further document, a schedule of Centrelink payments, was also tendered on behalf of the Applicant (Exhibit A2).

BACKGROUND

4. The Applicant, who is now aged 19, was injured in a motor vehicle accident on 3 February 1999. At the time of the accident she was aged 17 and a school student in receipt of Youth Allowance. On 31 August 2000 her compensation claim was settled for a lump sum of $110,000.00 including costs and out-of-pocket expenses. The Applicant received approximately $98,000 after payment of legal costs and out-of-pocket expenses.

5. Pursuant to section 17 of the Social Security Act 1991, the Respondent treated 50 percent of the compensation settlement of $110,000.00 as being the compensation part of the lump sum. The Respondent determined that Social Security benefits totalling $6622.83 had been paid to the Applicant during the period from 3 February 1999, being the day that the loss of earning capacity began, until 9 January 2001, and that the Respondent was entitled to recover that sum from the Applicant's compensation settlement.

6. The Respondent's decision to recover $6622.83 from the Applicant's compensation settlement was made on 8 September 2000 and the Applicant was advised to this effect by letter of the same date (T5).

7. At the Applicant's request the decision was reviewed but affirmed by an Authorised Review Officer on 24 November 2000. The Applicant again sought review and the decision was affirmed by the SSAT on 21 March 2001. On 23 April 2001 the Applicant lodged an application for review by the Administrative Appeals Tribunal.

ISSUES

8. The relevant issue in this matter is whether any special circumstances exist that would justify the exercise of the discretion under section 1184 of the Social Security Act 1991, to disregard part, or all, of the Applicant's compensation payment as not having been made. The issue of whether the compensation preclusion period imposed was calculated correctly was not in dispute.

APPLICABLE LEGISLATION

9. The relevant legislation in this matter is the Social Security Act 1991 ("the Act"), in particular sections 17(1), (2), (3), 1163 and 1184.

10. Subsection 17(1) of the Act specifies various payments that are affected by compensation and includes youth allowance. Paragraphs 17(2)(a) to (d) of the Act provide that a payment of damages or compensation, with or without admission of liability, whether in the form of a lump sum or a series of periodic payments, is compensation for the purposes of the Act.

11. In the case of settlement, subsection 17(3) of the Act provides that 50 percent of the lump sum compensation payment is the compensation part for the purposes of the Act.

12. Section 1163 of the Act provides that compensation may affect social security payments. Section 1165 of the Act sets out how a compensation preclusion period is to be calculated. Subsection 1165(1A) of the Act provides the basis for precluding a compensation affected social security payment, to a person who is not a member of a couple, where compensation payment made on or after 20 March 1997 affects entitlement. Subsections 1165(5), 1165(8) and 1165(9) of the Act provide the calculations to determine the effect of compensation upon a person's social security entitlement.

13. The Applicant does not dispute how the lump sum preclusion period was calculated. However, she contends that there are special circumstances to justify the exercise of the discretion to treat the whole or part of her compensation settlement as not having been made, under section 1184 (1) of the Act which states:

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

(a) not having been made; or

(b) not liable to be made;

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

"Special circumstances", however, is not defined by the legislation.

THE APPLICANT'S EVIDENCE

14. The Applicant gave sworn evidence and was cross-examined on behalf of the Respondent. Questions were also put to the Applicant by the Tribunal.

15. The Applicant told the Tribunal about the motor vehicle accident in which she had injured her knees and that it was this injury which had continued to cause her problems. At the time of the accident she was aged 17 and was in Year 11 at school.

16. The Applicant did not attend school 'for ages', 'on and off for the whole year'. She had also been ill during her final year, but '95%' of her absences were because of her knees. She was ineligible for a train or bus pass and could not manage the half-hour walk to school. She was reliant upon her mother for transport, who would only drive her about once every 2-3 months. During Years 11 and 12 she had been in receipt of Youth Allowance but had to spend this on taxi fares to school. Having regard to her injuries, she was surprised by her HSC results, which were better than she expected.

17. Although she had started a hairdressing course in Year 11, she had hoped to do marine biology when she left school. She did not elaborate upon this intention but clearly it did not come to fruition. After finishing school, following the HSC in 2000, she did not apply for jobs nor register for unemployment benefits. She said this was because her knees cause her problems when walking, she cannot stand for more than one hour and also has problems sitting. She has difficulty walking up stairs and finds long distances impossible. She has produced medical evidence to Centrelink in support of this.

18. The Applicant told the Tribunal she has no plans for getting into the workforce but doesn't want to be 'a bludger'. She regards work as 'part of everyday living'. Presently she is more worried about finding somewhere permanent to live. She said of her plans for the future: 'I'm lost'.

19. The Applicant's personal injuries claim was settled on 31 August 2000 while she was in Year 12. She was shown a copy of the letter sent to her by Centrelink on 8 September 2000 (T5) in which she was informed that the amount to be repaid to Centrelink was $6622.83. She said she had seen the letter but did not know when. She stated that her mother had taken over all the paperwork associated with the motor vehicle accident claim.

20. It was not until July 2001 that she applied for benefits because she did not, until that time, need the money, as she had a large sum available to her from the settlement. She discovered at that time that she had 'no money left'. She was given one payment and then it was 'cut off' and she was asked to produce bank statements and receipts in order for benefits to be re-instated, which occurred in September 2001.

21. The Applicant told the Tribunal that she had left home on 22 October 2001 because her mother 'could not afford to keep her'. She elaborated on this, saying her mother had 'kicked her out', but she is still in touch with her mother who pays, for example, the car insurance.

22. The Applicant had personally received $98,000 from the proceeds of the settlement. She was asked on what she had spent that money. She said she had wasted it. She could only recall two substantial purchases. She had bought a car for about $15,000 and had paid for a funeral for an unknown person she had read about in the newspaper for about $3,000 or $3,500. She had also bought a TV and video and a washing machine for her mother. She had decorated her room and bought clothing. The balance was spent on 'little things', that is, items costing less than $100. She would 'shout' family and friends for dinner and at the hotel and when she went shopping. Things she would buy while shopping with friends would not exceed $100. She estimated that the value of the car is now about $10,000, but she cannot afford to run it.

23. The Applicant stated that she had no experience in dealing with large sums of money. After the settlement she had gone to a financial consultant but had considered the recommended strategies to be too risky and decided to manage her own affairs.

24. The Applicant 'lived off interest', under an arrangement which she understood to be something like 'a Christmas club', to which her mother also had access. She did not know if it was a term deposit, but she received monthly interest of about $100.

25. The Applicant stated that she has some continuing expenses associated with her condition but these are paid at a reduced rate because of her 'low income card.' Until four weeks prior to the hearing she had lived at home where she paid $34 a month, or a fortnight and $70 per fortnight board. In addition, she bought her own toiletries and made a contribution to the phone and electricity.

26. The Applicant was asked questions about the evidence she gave before the SSAT. In particular, it was brought to her attention that, although only three months before her application for benefits, because she had spent all the settlement monies, she had said nothing to the SSAT about the money all being gone. Specifically her attention was directed to paragraph 10 of that decision in which it was recorded:

"Miss Walker and her representative confirmed that no arguments were made in terms of financial hardship in that she had some $90,000 invested. She confirmed that she was living at home, received interest from her investment, and paid rent and board."

27. In answer to this the Applicant said that nothing she had said was invented. At the time of the SSAT hearing there was no issue about lack of money because she still had some. She did not at that time know what her bank balance was. She would throw out all bank statements without looking at them, because she did not know much about banking. She stated that she cannot now produce bank statements because the bank has told her these would cost $250 to produce and she does not have the money.

28. The Applicant stated that she made withdrawals from ATMs and it was from an ATM that she learned that she had almost no money left.

SUBMISSIONS

applicant

29. Mr Williamson put forward the Applicant's submissions on three bases. Firstly, he said that while it was accepted that there is the need for the '50 percent rule' so as to prevent "double dipping", in cases such as this it was necessary to examine more closely the terms of settlement.

30. Mr Williamson referred to von Doussa J's comments in Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349 about the difficulty, when a claim is settled by negotiation, of dissecting the settlement into component parts. He referred to von Doussa J's reference to the Second Reading Speech on the relevant Social Security Amendment Bill by the Honourable Mrs Kelly MP (Hansard, 13 April 1988) which states at p 1497:

"Settlements of lump sum compensation particularly in the worker's compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of Social Security payments. To prevent this abuse the Minister announced on 8 February 1988 that, for personal injury settlements made by agreement or by consent order, 50% of the lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect to this proposal.'

31. Mr Williamson referred to the relatively recent Tribunal decision in Harmat v Secretary, Department of Family and Community Services (2000) 4(6) SSR 73 where the Applicant had never worked and the operation of the 50 percent rule was found to give rise to an unreasonable and unjust result.

32. Mr Williamson also referred to Re Secretary, Department of Social Security and Beel (1995) 38 ALD 736, where the settlement figure was examined to see the component parts. In that case, the Tribunal accepted that it was clear that the economic loss component was less than half the total settlement. The Tribunal decided it was unfair to apply an arbitrary formula because this would lead to an unfair result.

33. Mr Williamson pointed out that in the Applicant's case, she could not be said to have received past economic loss because, at the time, of both the accident and the settlement, she was still at school and had never worked.

34. Secondly, Mr Williamson said that in the Applicant's case there were other matters which should be considered part of the special circumstances of her case. The settlement monies had now been completely spent. The Applicant was not worldly, being a financially naive teenager at the time of settlement and reliant upon her mother. She had sought financial advice but had considered the proposed investments to be too risky. A prudent person would put money aside and the evidence pointed to a person unable to handle money. If she had been financially astute she would have applied for social security benefits in January, when she first became eligible. Consequently, she had forgone an amount of about $4,000, to which she would have been entitled.

35. Thirdly, Mr Williamson pointed to the evidence of the Applicant's current impecunious circumstances. She has had a falling out with her mother, upon whom she had relied, she has 'blown' all the settlement monies and now relies on social security benefits. She needs no further burden, as the necessity to repay would produce. She had said of herself: 'I'm lost'. She is a person of no skills and with physical disabilities.

36. In conclusion, Mr Williamson submitted that as there was so little (about $2,500) between what the Applicant would have been entitled to had she claimed benefits when first eligible, and the amount to be repaid, then the sums should be 'matched out', or at worse, the Applicant should have to repay only the difference.

respondent

37. Mr Kenny, for the Respondent, referred the Tribunal to Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 and submitted that while it was open to the Tribunal to consider the Applicant's circumstances after the date of the decision under review, care should be taken in doing so. In particularly he referred to Hill J's reasoning at 264:

"...it cannot be said that events at the time of hearing would necessarily be irrelevant. It is clear enough that the tribunal... must take into account the facts as they exist at the time the matter is heard by the Administrative Appeals Tribunal, to the extent those facts are relevant to the decision. It is not limited to taking into account events which occurred at the time the original decision was made, nor for that matter facts as they were known at that time, notwithstanding that later knowledge would lead to a revision of the earlier factual assessment. However, the fact that the tribunal can consider facts after the date the initial decision was made does not mean that every fact after that date is necessarily relevant. ... clearly the decision-maker or tribunal in place of the decision-maker could take into account the economic circumstances existing at the time of the decision."

Mr Kenny added this concern in relation to the Applicant's current entitlement to benefits and in inferring what benefits the Applicant may have been entitled to since she left school.

38. Mr Kenny asked the Tribunal to consider the evidence in relation to the offer of settlement made on the Applicant's behalf - namely one in which economic loss was just under half the amount. He submitted that as the Applicant had settled her claim for half the amount she had originally sought, it was reasonable that, as the overall sum was reduced by half, the economic loss component was similarly reduced by the same proportion. She was at the start of her earning years and a number of occupations (for example, hairdressing) may no longer be open to her because of her condition. This would support the notion of a component for economic loss. Mr Kenny submitted that the application of the '50 percent rule' was therefore entirely appropriate.

39. Mr Kenny highlighted that the legislation makes no distinction between past and future economic loss in the application of the formula. Therefore the whole of the deemed amount is relevant under section 17 of the Act.

40. Mr Kenny submitted that the approach adopted in Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152 should be followed in this matter. In that case, Bulley J decided that the fact that the compensation claim was settled out of court, because there were difficulties in proving economic loss, was not a special circumstance. Mr Kenny argued that the decision in Beel (supra) was not consistent with the other decisions and should be disregarded. He noted that in Re Secretary, Department of Social Security and McFetrish [1998] AATA 367, the Tribunal decided that a relatively small loss of earnings component did not negate the application of the 50 percent formula.

41. Mr Kenny noted that the issue of 'going behind' an award of damages has recently been considered in Department of Family and Community Services v Chamberlain before Kiefel J in the Federal Court. A decision has yet to be handed down in relation to that matter.

42. With regard to Mr Williamson's submission as to the injustice of applying the 50 percent formula in the Applicant's case, Mr Kenny contended that there was no element of uniqueness about the Applicant's case. He submitted that there should be consistent application of the 50 percent formula and, in the Applicant's case, there were no special circumstances which would justify overturning the application of the formula. The Applicant had plenty of money to last through the preclusion period and in fact for six months after that time. Although notified of the debt very soon after the settlement she had put nothing aside to meet it and had spent all the money.

43. As to the submission in relation to financial hardship, Mr Kenny said that the circumstances of the Applicant's hardship were of her own making. He submitted that it was abhorrent that the public purse should be asked to have to bear her spending, which he described as 'reckless'. The Applicant sees herself as unemployed and has no plans for getting into the workforce. Her only substantial asset appears to be her car, which she said she cannot afford to run. Mr Kenny suggested that the sale of her car would more than cover her debt to the Commonwealth.

44. Mr Kenny further asked the Tribunal to consider that the issue of financial hardship had only arisen since the SSAT hearing in March of 2001. At that time the Applicant was recorded as having some $90,000 invested.

45. At the conclusion of the Respondent's submissions Mr Williamson urged the Tribunal not to delay its decision in the present matter until the decision of the Federal Court in Department of Family and Community Services v Chamberlain had been handed down.

CONSIDERATION OF RELEVANT CASE LAW

46. The issue to be determined by the Tribunal is whether, pursuant to s 1184(1) of the Act, there are special circumstances which justify exercise of the discretion to treat the whole or part of the compensation settlement as not having been made. Although the Act provides no guidance as to the meaning of "special circumstances", this has been the subject of statutory interpretation by the Federal Court and the Tribunal.

47. The leading case is the decision of the Full Federal Court in Beadle v Director-General of Social Security (1985) 7 ALD 670. In that case the Court did not think it possible to lay down precise limits or rules, saying that what amounted to 'special circumstances' would depend on the circumstances of each case. Even though the phrase lacks precision, it was stated by the Court that it "is sufficiently understood ...not to require judicial gloss" (at 674). The Court affirmed the decision of the Tribunal in that case in which it was said that the circumstances "must have a particular quality of unusualness that permits them to be described as special" (Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3).

48. In Groth v Department of Social Security (1995) 40 ALD 541 at 545, Kiefel J, after referring to the Federal Court's decision in Beadle (supra), observed that special circumstances:

"Would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case...it would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."

49. In the Federal Court decision in Secretary, Department of Social Security v Hales (1998) 82 FCR 154at 162, French J said of the "concept" of special circumstances that the evident purpose "is 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. He further stated that "it is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words."

50. The Tribunal then considered the line of cases which deal specifically with the exercise of discretion under s 1184(1), where it is alleged that the economic loss component of the compensation settlement is significantly less than the 50 percent of the compensation settlement which is used to calculate the lump sum preclusion period. In Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 424, von Doussa J said in relation to the 1947 Act equivalent of s 1184(1):

"The paragraph seeks to eliminate double dipping in a practical way which operates effectively in a straightforward manner. In the very nature of an arbitrary provision, subpar (i) could possibly entail a degree of unfairness in a particular case..."

51. In Secretary, Department of Social Security v Smith (1991) 30 FCR 56, von Doussa J once again examined this issue. In this instance, he considered whether the 1947 Act equivalent of s 1184(1) could be used to address an apparently unjust outcome reached as a result of the application of the 50 percent formula. It had been argued that the equivalent of s 1184(1) could not have been intended to permit the overriding of an injustice that was the product of legislation itself. Von Doussa J said, at FCR 60, that he was:

"...unable to accept this argument. The fallacy of the argument lies in its failure to read s 156 as part of the overall scheme..."

He continued at FCR 61:

"The arbitrary nature of the provisions of s 152 would have been quite apparent to the legislature... At the same time the legislature must have recognised that from time to time a case must arise where the degree of unfairness to a recipient of a payment by way of compensation would bring about an unreasonable or unjust result which was outside that which could be justified by the practical expediency of the arbitrary nature of the provisions in ss 152 and 153."

52. From von Doussa J's analysis it is clear that s 1184(1) can be used to address an injustice arising as a result of the application of the 50 percent formula.

53. In Re Fowles (supra), Bulley J decided s 1184(1) should not be applied in the case of an out of court settlement where no component for lost earnings or lost capacity to earn was identified. He said, at ALD 163, that an:

"...approach of seeking to dissect the lump sum into components by disguising it under the phrase "special circumstances" pursuant to s 1184 should not be countenanced."

54. However, in Beel (supra), s 1184(1) was applied in a case that involved a worker's compensation settlement of $60,000.00 of which $10,500.00 was designated as compensation for loss of income and earning capacity. The Tribunal noted, at ALD 738:

"No evidence was placed before the tribunal which would allow an inference to be drawn that the quantum of each component of the consent order was in any way manipulated to achieve a specific result with implications for social security benefits. In fact the quanta arrived at under paragraph 3(I) and (2) of the consent order were taken from the Table, Compensation for Permanent Injuries which forms part of the Workers Compensation Act 1987 (NSW) No 70. I find that there was no manipulation of the individual components of the order."

The Tribunal, at ALD 739, decided that "it would be unfair, unjust and quite inappropriate under these circumstances" to leave the compensation part of the lump sum at $30,000.00 (that is, 50 percent of $60,000.00). The Tribunal in that instance therefore exercised its discretion under s 1184(1) to:

"treat that portion of the lump sum as not having been made which results in the compensation part of the lump sum being $10,500."

55. In McFetrish (supra), Ms McFetrish received a compensation settlement of approximately $23,00.00. Applying the 50 percent formula to this sum, the Department imposed a charge of $3,113.06 in respect of parenting allowance paid during the preclusion period. The defendant's solicitors in respect of the compensation settlement stated that the economic loss component was $2,000.00. The Tribunal did not, however, consider it appropriate "to dissect the lump sum" (at paragraph 14), and did not consider the financial disadvantage to Ms Fetrish and the fact that she had had the care of a disabled child sufficient to establish special circumstances.

56. Re Sales and Secretary, Department of Family and Community Services [1999] AATA 963 involved a compensation settlement where the actual economic loss component of the settlement was less than 50 percent of the total. The Tribunal decided in that matter that this and other circumstances were not sufficiently "special" to warrant exercise of the discretion under s 1184(1) of the Act.

57. Turning to more recent cases, the Federal Court decision in Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64. There Merkel J decided that (at FCR 73):

"In the present case, it was open to the AAT to find that no part of the compensation the applicant received related to a period during which social security payments were payable with the consequence that, as there has been no "double payment", there were "special circumstances" for the purposes of s 1184(1). In such circumstances the exercise of the discretion under s 1184(1) would not be inconsistent with the policy and purpose of the statutory scheme."

58. Finally, in Harmat (supra) the Tribunal concluded that there were special circumstances in that the identified component in the compensation settlement was 14 percent of the total settlement and that the application of the 50 percent formula produced an unreasonable and unjust result in Harmat's case.

59. In respect of the submissions that the imposition would create financial hardship on the Applicant, thereby amounting to 'special circumstances' the Tribunal turned to consider the relevant cases. Essentially, to qualify for 'special circumstances', financial hardship must go beyond 'straitened' circumstances and be truly exceptional. The law on this point was summarised in Re Brodley and Secretary, Department of Social Security (1991) 63 SSR 878 where the Tribunal said:

"In Re Colaiacolo and Secretary, Department of Social Security (Decision No 2109, 24 April 1985) it was stated that the factor of financial hardship alone is not sufficient to amount to special circumstances unless it is "exceptional"... The Tribunal is also mindful of Re Bolton (supra) where reference was made to Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 where Mr B McMahon, Senior Member (as he then was) stated at para 43 that:

"Financial hardship had been considered as a possible component of special circumstances in a number of decisions. It is clear, however, that standing by itself, it would not amount to a "special circumstance" (Re Beadle, 6 ALD 1 at 4). Furthermore, the financial circumstances must be more than straitened. They must be 'exceptional'."."

60. Further, in Re Martin and Secretary, Department of Social Security (AAT 6482, 14 November 1990) the Tribunal summarised the matter as follows:

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

CONSIDERATION OF THE APPLICANT'S CASE AND FINDINGS

61. There is no dispute that following a motor vehicle accident the Applicant received a lump sum settlement of $110,000.00 including costs and out-of-pocket expenses.

62. The Tribunal turned to consider if it would be unfair and inappropriate under the circumstances to regard the economic loss component of the lump sum at 50 percent of $110,000.00).

63. In response to a request for further and better particulars of the Applicant's claim, her solicitors had written 'not applicable' in respect of 'continuing economic loss or diminution of earning capacity' (Annexures "C" and "D" to Exhibit A1). This, the Tribunal noted, was only within a few weeks of the accident.

64. In September 1999 Dr Caldwell provided a report (Annexure B to Exhibit A1) in which he said at page 7:

"Unfortunately Charmain has dashboard knee syndrome. This is the occurrence of persistent anterior knee pain following a direct blow to the knee normally seen in a motor vehicle accident.

This condition does not appear to respond to any known therapy. It does not improve nor deteriorate."

65. Dr Caldwell's view was adopted by the Applicant's treating orthopaedic surgeon, Dr Lim in his report of 26 February 2000 (Annexure B to Exhibit A1). He noted the Applicant's complaints of persistent pain in her knees and that she said she could no longer walk without pain, play sport or swim. He added:

"I am now unable to predict the outcome of her painful knees. She will be given every treatment modality, which may improve comfort and function."

66. Shortly thereafter, on 14 March 2000, the Applicant's solicitors wrote to the insurance company with an offer of settlement, identifying a component for 'loss of economic capacity' at just under half the total settlement offer. (page 5 of Annexure G to Exhibit A1). The counter offer in response was minimal and did not purport to provide a breakdown as to how the counter-offer was formulated (page 6 of Annexure G to Exhibit A1). There was no evidence before the Tribunal as to subsequent offers and counter-offers which led to the ultimate resolution of Ms Walker's claim, other than as to acceptance of the final offer.

67. On the basis of the available evidence the Tribunal found that no economic loss claim was originally contemplated by the Applicant and her solicitors. However, it was clear, by the time that the first offer of settlement was made in March 2000 that the Applicant's condition had not fully resolved and the prognosis was poor, which was reflected in the solicitors' offer including a component for 'loss of economic capacity'.

68. The Tribunal therefore found that the lump sum settlement of $110,000 included an unspecified component for 'loss of economic capacity'.

69. It was submitted on behalf of the Applicant, in essence, that as the Applicant had not worked before the accident (nor for that matter up till the date of settlement) because she was a school student, if an economic loss component to the settlement was found, it could only relate to future economic loss.

70. However section 17(2) provides as follows:

"Compensation

17(2) Subject to subsection (2B), for the purposes of this Act, compensation means:

(a) a payment of damages; or

(b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d) any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury." [Emphasis added].

71. Section 17(2) therefore clearly refers to both past and future economic loss (see also Re Secretary, Department of Social Security and Hill (1995) 2(1) SSR 9).

72. The Act makes no provision for apportioning between past and future economic loss and therefore the whole of the deemed economic loss component is subject to section 17.

73. The Tribunal then turned to the other submissions, made on the Applicant's behalf, that there were other matters to should be considered part of the special circumstances of her case.

74. These submissions were, in essence, that the settlement monies had now been completely spent because the Applicant had been a financially naive teenager at the time of settlement. Because of her present impecunious circumstances, to require her to repay in excess of $6,000 would cause her financial hardship.

75. The Applicant had received $98,000 from the proceeds of the settlement and conceded she had wasted it. She could only recall two substantial expenses - payment of a car, now worth about $10,000, and payment of a funeral for $3,500. She had also bought some appliances for her mother. Otherwise she could only think she had spent the money on decorating her room and on clothing. She showed generosity to family and friends but otherwise frittered the money.

76. The Tribunal accepts that the Applicant had no experience in dealing with large sums of money and, somewhat foolishly, had declined to follow professional financial advice. The money appears to have been invested in some fashion but the Applicant did not know what this entailed - 'something like a Christmas club'.

77. There was some inconsistency in that in March 2001 at the SSAT the money appears to have been invested but by July 2001 she was impecunious. The Applicant's evidence was that she did not know the state of her finances because she threw away her bank statements and ATM receipts. In accepting the Applicant's evidence before the Tribunal as consistent with her financial naivety, the Tribunal found that by July 2001, that is, in less than a year after settlement, she had spent the entire $98,000. The Tribunal accepts that the Applicant currently has no assets, with the exception of her car and some household goods such as a sound system.

78. In Banks (supra) von Doussa J, said at paragraph 20 that the discussion of the application of the 50 percent formula "should be viewed as a broad attempt to balance the interests of the recipient of the payment with the competing interests of others in the community".

79. As to financial hardship, the Tribunal found that the Applicant's present financial circumstances to be of her own making. In the Tribunal's view, the operation of the 50 percent formula does not give rise to such an unreasonable and unjust result in the Applicant's case - notwithstanding her ongoing medical situation and financial circumstances - that exercise of the s 1184(1) discretion is warranted. In the Tribunal's view, such an approach is consistent with von Doussa J's analysis of the law in Banks (supra), cited above.

CONCLUSION

80. The Tribunal therefore concludes that given that there are no special circumstances in the Applicant's case, it is inappropriate to exercise the discretion in s 1184(1) of the Act by treating that portion of the lump sum settlement as not having been made.

I certify that the 80 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, MEMBER

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

Associate

Date of Hearing 21 November 2001

Date of Decision 7 February 2002

Representative for Applicant Mr A Williamson

Advocate for the Respondent Mr J Kenny