Blanco; Secretary Department of Family and Community Services [2003] AATA 26 (15 January 2003)

Last Updated: 16 January 2003

DECISION AND REASONS FOR DECISION [2003] AATA 26

ADMINISTRATIVE APPEALS TRIBUNAL ) No N2001/1395

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And LILIAN BLANCO Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date 15 January 2003

Place Sydney

Decision The Tribunal sets aside the decision of the Social Security Appeals Tribunal and in substitution therefor determines that the Respondent is liable to the Applicant in the sum of $7116.79.

[SGD] Member

CATCHWORDS

SOCIAL SECURITY - lump sum workers' compensation payment - preclusion period - whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made - unfairness of the strict application of the '50% rule' - insurer liability to pay - whether customer absolved from payment

LEGISLATION

Social Security Act 1991 - sections 17, 1166, 1177, 1178, 1182, 1184, 1184K, 1225, 1237AAD

CASE LAW

Re Veness and Secretary, Department of Family & Community Services [2000] AATA 6

Re Secretary, Department of Family and Community Services & Dujmovic [2000] AATA 208

Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN N225

Re MT and Secretary, Department of Social Security (1986) 9 ALD 146

Re Kandasamy and Secretary, Department of Social Security (1987) 11 ALD 440

Re Ruggeri and Secretary, Department of Social Security (1985) 8 ALD 338

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

Re Junor and Secretary, Department of Social Security (AAT 11802, 12 March 1997)

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

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

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

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

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

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

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

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

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

Re Brodley and Secretary, Department of Social Security (AAT 7239, 14 August 1991)

Ebrahimi and Secretary, Department of Social Security (AAT 12872, 11 May 1998)

Andrews and Secretary, Department of Family & Community Services [1999] AATA 516

Soriano and Secretary, Department of Family & Community Services [2000] AATA 842

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

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

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

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

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

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

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

Department of Family and Community Services Guide to Social Security Law, Commonwealth of Australia, 4 November 2002

REASONS FOR DECISION

January 2003 Ms N Isenberg, Member

DECISION UNDER REVIEW

1. The Applicant, the Secretary, Department of Family and Community Services ("the Department") decided on 28 March 2001 to impose a preclusion period from 27 April 1995 to 17 July 1996 (T16). That decision was affirmed by the Authorised Review Officer on 19 June 2001 (T24).

2. The Social Security Appeals Tribunal ("the SSAT"), in its decision of 2 August 2001 (T2) decided to set aside the decision under review.

3. The Applicant seeks review of that decision.

BACKGROUND

4. On 27 April 1995 the Respondent was involved in a motor vehicle accident and as a result claimed compensation.

5. On 20 June 1995 the Respondent started receiving Job Search Allowance (T2 p3).

6. On 24 July 1995 the Respondent completed a "Mod C" informing the Applicant of her claim for compensation as well as details of her solicitors and the other driver's insurer, FAI General Insurance Co (T4 p10).

7. In a notice dated 30 September 1995 the Applicant notified the Respondent that she may have to refund Job Search Allowance payments from her compensation settlement (T5 p13). In a further notice of the same date the Applicant asked the Respondent's solicitors, to advise if "your client receives a payment by way of compensation" or "settlement of your client's action". (T7 p16) Also on the same date a preliminary notice was issued to FAI General Insurance Co, issued pursuant to section 1177 of the Social Security Act 1991 ("the Act") (T6, p15).

8. On 1 April 1996 the Respondent stopped receiving Job Search Allowance (T2 p3).

9. On 2 February 1998 the Respondent's solicitors faxed a request for an estimate of the charge which might apply in connection with a proposed lump sum compensation amount of $93,000 (T10).

10. In a decision dated 18 March 1998 the Respondent was awarded compensation of $46,900.50, of which the economic loss component was $25,902 (Exhibit R9).

11. On 31 May 1998 the Respondent departed for overseas (T11) and it was not until 3 June 1998 that her solicitors wrote to her advising her of the sum awarded. A cheque for $40,715.63 was sent to the Respondent on 1 September 1998.

12. On 4 August 1998 Centrelink received a letter from the Respondent authorising her sister, Daisy Ong, to act on her behalf. (T12)

13. In November 1998 the Respondent returned from overseas and applied for, and was granted, Newstart Allowance. In her interview she discussed the money she had in her bank accounts made up of savings and compensation money. In her application form dated 2 December 1998 the Respondent listed the money held in her bank accounts. (T27, p75)

14. In June 1999 the Respondent stopped working in order to care for her elderly mother who suffers from a heart condition, diabetes, glaucoma, anxiety and some dementia. Prior to that time the Respondent's sister had cared for their mother. In August 1999 the Respondent's income support payment was transferred from Newstart Allowance to carer payment.

15. Through a data matching exercise conducted on 12 December 2000 between Centrelink and the Health Insurance Commission (T13) information was obtained that the Respondent had received a lump sum compensation payment.

16. On 28 March 2001, after contacting the Respondent and obtaining further details from FAI insurance (T16) the Applicant sent a notice to the Respondent advising her of the compensation preclusion period from 27 April 1995 until 17 July 1996 and the amount of her compensation charge, $7,116.79 (T16 p 31).

APPEARANCES

17. A hearing was held before the Tribunal on 15 November 2002 at which Susan Mantaring, an advocate from the Advocacy and Administrative Law Team at Centrelink appeared on behalf of the Applicant and Jackie Finlay of Welfare Rights Centre Inc. appeared on behalf of the Respondent.

DOCUMENTARY EVIDENCE

18. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence.

19. In addition, the following documents were tendered:

Exhibit Description Date

A1 Applicant's Statement of Facts & Contentions 17 December 2001

A2 Applicant's Statement of Issues 10 October 2001

R2 Respondent's Chronology

R3 Respondent's Statement of Facts & Contentions 25 September 2002

R4 Attachment A 15 May 1998

R5 Attachment B 1 September 1998

R6 Attachment C

R7 Attachment D

R8 Napier Keen Solicitors Letter to Respondent 3 June 1998

R9 Arbitrator's Decision 13 May 1998

R10 Respondent's Authorisation to her sister 1 June 1998

ISSUES BEFORE THE TRIBUNAL

20. There was no dispute that if the statutory formula were applied to the Respondent's circumstances a preclusion period would result from 20 June 1995 to 1 April 1996 and that this would give rise to a debt of $7116.79.

21. The issues before the Tribunal were:

* does the Respondent owe a debt of Newstart Allowance in the amount of $7116.79?

* If so, is the Respondent liable to repay this amount to the Applicant?

* If so, are there special circumstances that it make appropriate to disregard some or all of the compensation payment made to the Respondent pursuant to section 1184K of the Act?

* In the alternative, should the debt be waived pursuant to section 1237AAD of the Act?

Evidence: the Respondent

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

23. The Respondent gave evidence that she had received a soft tissue injury to her neck in 1985 and, as a result, was unable to work in her field of biological research. She had pursued a compensation claim through her solicitors and all the negotiations had talked about 'clear money' and money 'in the pocket'. She did not know about other obligations such as legal expenses or about any effect upon her Jobsearch payments. In talking about 'clear money' she took this to mean that there would be no further deductions from what she would receive.

24. She needed a break so went to the Philippines to do volunteer work. At the time she left she was under a lot of stress and doctors didn't know what was wrong with her. She may have had allergies or a heart condition or panic attacks. Communications facilities were limited and she did not find out about the settlement until August 1998 when her sister wrote to her. Before going overseas she had given her solicitors all her details such as her address, phone and e-mail. Although the solicitors wrote to her on 3 June 1998 she did not receive that letter until much later. She wrote back to the solicitors complaining that she very unhappy with the amount of compensation she received because she did not consider it adequately compensated her for her economic loss. She said they discouraged her from taking the matter further.

25. She conceded in cross-examination that in September 1995 she had received the notification of a possible obligation to pay back part of her compensation payment (T5). She said was aware of her obligation to declare her compensation payment but understood her solicitor to be taking care of everything. She believed she was 'free of this responsibility'. She admitted that she had nothing in writing to this effect, nor did she confirm this with Centrelink.

26. When she returned to Australia in December 1998 she went to Centrelink and applied for Newstart Allowance. She agreed that she had answered 'No' to the question 'Have you claimed, or are you entitled to claim, compensation or damages for an accident, illness or injury?' (T27 p77) She had done this because her claim was, by that time, 'over'. She said that in the claim form she had listed all her assets including the amount she had received from the compensation payment. She said she was not asked (nor did she volunteer) as to the source of this money but, had she been asked, she would have attributed it to the compensation payment.

27. She said that in about August 1999 she stopped working in order to care for her elderly mother who suffers from a heart condition, diabetes, glaucoma, anxiety and some dementia and who could not be left alone. Prior to that time her mother had been cared for by her sister but, on her marriage, this was no longer possible. There was no other feasible alternative but for the Respondent to take over the role.

28. She said she bought a house near her mother and they spend some nights there and some at her mother's home. Her mother does not want to give up her own home. The Respondent said she had borrowed money, interest free, from relatives to buy her home and they 'don't stress her for payment'.

29. She said she was 'really shocked' to learn of the imposition of the preclusion period in about February or March 2000, particularly as it is a 'huge' debt. Her Visa Card limit is only $1000 and she never uses it. She said she always lives within her means. By the time she received the notice she had already spent the money on buying her house.

SUBMISSIONS

30. The Respondent raised a preliminary argument, in effect, that as the Applicant had elected to issue a preliminary notice to the insurer under section 1177(1) it was estopped from pursuing the Respondent for the debt.

31. The advocate for the Respondent referred to sections 1177, 1182(1) and 1182(2) of the Act (as at the date of the raising of the compensation charge) and submitted that the insurance company, FAI General Insurance Co, and not the Respondent, has a statutory liability for the debt.

32. The relevant legislative provisions are as follows:

Division 5 -- Insurers

Secretary may send preliminary notice to insurer

1177(1) If:

(a) a person makes a claim against a potential compensation payer for compensation wholly or partly in respect of the person's lost earnings or lost capacity to earn; and

(b) the person receives or claims a compensation affected payment for any period to which the compensation relates; and

(c) the potential compensation payer's insurer, under a contract of insurance, may be liable to indemnify the potential compensation payer against any liability arising from the claim for compensation;

the Secretary may give written notice to the insurer that the Secretary may wish to recover an amount from the insurer.

1177(2) A notice under subsection (1) must contain:

(a) a statement of the insurer's obligation under section 1178; and

(b) a statement of the effect of section 1182 so far as it relates to a preliminary notice.

Offence to make compensation payment after receiving preliminary notice or recovery notice

1182(1) If an insurer has been given a preliminary notice under section 1177 or a recovery notice under section 1179 in relation to the insurer's liability to make a payment indemnifying a compensation payer, the insurer must not make the payment to the compensation payer unless:

(a) in the case of a preliminary notice -- the Secretary has given the insurer written notice that the preliminary notice is revoked; or

(b) in the case of a recovery notice -- the insurer has paid to the Commonwealth the amount specified in the notice; or

(c) the Secretary has given the insurer written permission to make the payment to the compensation payer.

Penalty: Imprisonment for 12 months.

Liability to pay Commonwealth

1182(2) An insurer who contravenes subsection (1) is, in addition to being liable under subsection (1), liable to pay to the Commonwealth:

(a) if the contravention relates to a preliminary notice -- an amount determined by the Secretary; and

(b) if the contravention relates to a recovery notice -- the recoverable amount specified in the notice.

1182(3) The amount determined by the Secretary under paragraph (2)(a) must not be more than the smallest of the amounts worked out under:

(a) if the person claiming compensation is not a member of a couple -- subsection 1179(4); or

(b) if the person claiming compensation is a member of a couple -- subsection 1179(5) or (6), as the case may be.

33. In this case the Applicant issued the insurer, FAI, a preliminary notice under section 1177 (T6). The notice complied with the requirements in section 1177(2). Contrary to section 1182(1) FAI released the compensation money to the Respondent's solicitors. As a result, pursuant to section 1182(2), FAI is liable to pay the amount of the compensation charge to the Applicant.

34. It was the contention on behalf of the Respondent that whilst the insurer remains liable for the amount of the compensation charge the Applicant cannot seek recovery from the Respondent.

35. In this regard the advocate for the Respondent invited the Tribunal's attention to section 1166(1) of the Act as follows:

Secretary may require person to take action to obtain compensation

1166 (1) If:

(a) a person receives or claims a compensation affected payment; and

(b) the person or the person's partner is, or, in the Secretary's opinion, may be, entitled to compensation; and

(c) the person or the partner:

(i) has taken no action to claim or obtain the compensation; or

(ii) has taken no action that the Secretary considers reasonable to claim or obtain the compensation;

the Secretary may require the person or the partner to take the action specified by the Secretary.

36. The advocate for the Respondent asked the Tribunal to compare the prescriptive nature of section 1182(2) and the permissive nature of section 1166(1).

37. She also invited the Tribunal's attention to the Applicant's guidelines contained in the Guide to Social Security Law which list the circumstances when recovery should be sought from the customer, noting that the Respondent does not fit within any of these circumstances.

6.4.9 Recovery Rules

...

Circumstances when recovery is sought from a customer

Recovery of CAPs from a customer, or former customer, should ONLY occur when:

* the insurer or compensation payer released the compensation payment, AND:

* the customer FAILED to notify Centrelink that they claimed compensation, AND a preliminary notice was NOT served, OR

* the customer NOTIFIED Centrelink that they claimed compensation, BUT a preliminary or recovery notice was NOT served, or was served incorrectly, OR

* the customer failed to notify Centrelink of an increase in the rate of periodic compensation, OR

* the customer's compensation was awarded or settled overseas, OR

* the customer received an ex-gratia payment , OR

* the periodic compensation arrears payments are assessed as ordinary income (applies to the PARTNER only). Recovery in respect of the compensation recipient is made direct from the compensation payer or insurer.

Any amount to be recovered from a customer MUST be recorded as a compensation debt.

38. It was submitted that the insurer remains solely liable to repay the compensation charge/debt.

39. The advocate for the Applicant conceded that the Act provides for recovery from the insurer. However, she said that had the settlement been properly notified to Centrelink a charge notice would have been served on the insurer before the monies were released to the Respondent. As a consequence of the settlement not being properly notified, the monies were released intact to the Respondent and it is proper for the debt to be recovered from her. The legislative scheme expressly contemplates situations where recovery will be sought from the individual under section 1166 of the Act. Such situations could only arise where recovery has not been made from the insurer, as in this case.

Findings on preliminary argument

40. This issue was addressed, to some extent in Re Veness and Secretary Department of Family and Community Services [2000] AATA 6 and Re Secretary Department of Family and Community Services and Dujmovic [2000] AATA 208. In each of those cases Hotop Senior Member, as he then was, considered situations where the preliminary notices to the insurers were found to be defective. He did not comment on whether the right to pursue the customer existed independently of that deficiency in the means of recovery from the insurer.

41. Senior Member Hotop's observations were in the context of whether there were special circumstances under section 1184, that is, he did not exclude, as a preliminary issue, the Department's right to pursue its customer in the event that the insurer was on notice of its obligations under the Act.

42. As to the Department's failure to follow its own guidelines the Tribunal notes that it has previously distinguished political policy statements from departmental guidelines. These guidelines have been described as "relevant only as forming part of the background of facts of which the AAT ought to be informed when making its decision": Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN N225. While acknowledged as being necessary to the administration of a large department the guidelines do not supplant legislation (Re MT and Secretary, Department of Social Security (1986) 9 ALD 146 at 150; Re Kandasamy and Secretary, Department of Social Security (1987) 11 ALD 440 at 445). It is, however, desirable that guidelines be followed: Re Ruggeri and Secretary, Department of Social Security (1985) 8 ALD 338 at 350.

43. It was the Applicant's position that as the legislative scheme envisages recovery from its customer under section 1166 of the Act, such situations only arise where recovery has not been made from the insurer, as in this case. The Tribunal agrees with this approach. The insurer will have an inescapable obligation to the Department while ever the Notice under Section 1177(1) remains unrevoked. Indeed, in releasing the funds the insurer committed an offence. It would still, even now, be open to the Department to pursue the liquidator of the insurance company. The liquidator then, no doubt, would look to the Respondent so that it, on behalf of the insurer, was not out of pocket for the compensation charge twice. The end result would be that the Respondent, by whatever route, would have repaid the debt of $7116.79 to the Department.

FURTHER SUBMISSION: Applicant

44. It was critical to the Applicant's case that the debt had arisen because the Respondent had failed to advise of her receipt of the compensation money. She had the opportunity to advise Centrelink on her Newstart claim form in December 1998 but she chose to tick 'No' to the compensation question. Her evidence was that the issue of the compensation settlement was not discussed at her new claim interview. Although she declared the balances of her money in the bank, there was nowhere in her claim that would result in Centrelink being alerted to her receipt of the settlement money. Because she ticked 'No' in the compensation question, Centrelink had no reason to check its computer records that she had a previous claim for compensation.

45. The Respondent's evidence was that she relied on her solicitors to advise Centrelink of the status of her compensation proceedings and eventual settlement. However, she did not show that she had taken any pro-active steps to ensure that her solicitors in fact advised Centrelink. The advocate for the Applicant submitted that the Respondent had a personal obligation to notify the Department of her settlement and that the obligation is one which cannot be passed on to a third person such as her solicitor.

46. The advocate for the Applicant asked the Tribunal to note that the collapse and liquidation of the FAI occurred after the release of the monies to the Respondent. Once the monies were released without the charge being recovered, it was proper for the Applicant to recover the debt from the Respondent. The subsequent collapse of FAI is of no relevance.

47. FAI was given notice in September 1995 that a charge may be recoverable. It was then given notice in February 1998 that a specified amount would be recoverable upon settlement. As the matter had not been settled at that time, no recovery notice was issued. FAI was on notice as to the Commonwealth's interest and erred in releasing the settlement money to the Respondent without ensuring that the charge had been deducted. However, the Applicant contended that this should not be regarded as a persuasive factor by the Tribunal, given that the Applicant failed to comply with her personal notification obligation which would have led to the earlier identification and recovery of the debt. It becomes irrelevant that Centrelink did not seek recovery from the insurer when the Respondent, herself, failed to comply with her notification obligations.

48. The advocate for the Applicant also submitted that there were no special circumstances in the Respondent's case, warranting the discretion under sections 1184 and 1237AAD.

49. As to her solicitor's failure to ensure compensation charge was deducted by FAI, the advocate for the Applicant submitted that negligence by a solicitor has not been regarded as a persuasive factor in establishing special circumstances. In particular, it was contended that it should not be a persuasive factor in these circumstances as the Respondent failed to discharge her own obligation to notify Centrelink of the settlement which would have led to the earlier identification and recovery of the debt.

50. In relation to the Department's failure to follow its own policy in recovering from FAI, the advocate for the Applicant noted that Centrelink issued preliminary notices to the Respondent, her solicitor and FAI in September 1995, putting each on notice that an unspecified amount may be payable as a result of a settlement being reached at a later date. In February 1998, following contact by the solicitor, Centrelink again sent notices setting out the amount that would be repayable. No recovery notice was issued at that stage because the claim had not yet been settled. The matter was settled a few months later but Centrelink was not advised by the Respondent, her solicitor nor FAI. Consequently, the charge notice was not issued until 2001 when Centrelink first became aware of the settlement as a result of a data matching exercise. By this time, the settlement monies had been paid out in full to the Respondent, hence recovery was pursued against her.

51. Similarly, it was contended that the Respondent contributed to Centrelink's delay in identifying the debt. The Respondent was under an obligation to notify Centrelink when her compensation claim is finalised and when she received the settlement monies, but did not do so.

52. The time elapsed from the Respondent's receipt of the settlement monies in September 1998 to the raising of the debt in March 2001 is not a special circumstance. Data matching between government department records is done under very strict Guidelines from the Privacy Commissioner. Having to compare the records held by the Health Insurance Commission and those held by Centrelink necessarily entail a substantial time lag. For this very reason, the Applicant relies on recipients of compensation payments and of Social Security payments to self disclose. The data exercise is an avenue of last resort when the recipients do not advise of their circumstances.

53. Centrelink had duly discharged its obligations to the Respondent by advising her of the need for her to notify Centrelink when she received her compensation settlement monies. The Respondent's evidence about when received the money is quite vague and unclear. She left Australia in May 1998 knowing that there was the remaining issue of the amount of the settlement that still needed to be determined. The advocate for the Applicant was critical of the Respondent for choosing to be outside the country when the amount of her compensation claim was being deliberated. It was argued that the bare arrangements the Respondent had in place were prone to miscommunications and misunderstandings. The Applicant's view was that whatever arrangements the Respondent had in place during her absence are of no relevance.

54. In any event, it was argued that case law had established that a notification obligation is a personal obligation and that the Respondent cannot rely on a third person informing Centrelink so as to meet her personal obligations. The Applicant strongly argued that the Tribunal should not be persuaded by the Respondent's contention that it was her solicitor and her sister who failed to notify Centrelink on her behalf.

55. The advocate for the Applicant referred to two cases: Re Secretary Department of Social Security and Weeks (AAT 7174, 16 July 1991) where the Tribunal declined to find special circumstances where the Respondent failed to advise the Department promptly of the receipt of lump sum compensation, and Re Junor and Secretary Department of Social Security (AAT 11802, 12 March 1997) where the Tribunal determined that the obligation to notify Centrelink is a personal obligation and that a third person cannot be relied on to meet one's personal obligations.

56. The advocate for the Applicant submitted in relation to whether there had been a significant change in the Respondent's circumstances that, by failing to discharge her personal obligation to notify Centrelink of the settlement, the Respondent directly contributed to the delay in the identification and raising of the debt.

57. Furthermore, it was contended that the Respondent's personal circumstances cannot be said to be "unusual, uncommon or exceptional" compared to the circumstances of others with caring responsibilities. She is not experiencing extreme financial hardship. That the Respondent and her mother occupy two houses, suggested that it is open to the Respondent to reorganise her living arrangements such that she and her mother can live in the Department of Housing premises and she can rent out her unencumbered house. The rent money can be used to repay her compensation charge debt.

58. The advocate for the Applicant contended that the discretion to waive the debt, conferred by both sections 1184 and 1237AAD is not warranted in this case. The debt has arisen because Centrelink was not advised that the Respondent had received her lump sum compensation payment. The amount of the charge was not remitted before the compensation payment was released to the Respondent's solicitors. There is no dispute that the lump sum payment paid to the Respondent is compensation as defined in section 17 of the Act and there is also no dispute that the preclusion period (and therefore the debt amount) has been correctly calculated.

59. The Applicant acknowledged that the types of matters capable of falling into the category of special circumstances are not necessarily restricted, however the circumstances must be such that they set the Respondent quite apart from other involving income support recipients who are awarded compensation payments. The circumstances must be such as to warrant an exception to be made to the general rule which provides that a person should not receive both compensation as well as income support for the same period. To do so is considered by the Applicant to be double dipping.

60. All or part of a debt may also be waived in the special circumstances of the particular case. Similarly an amount of compensation can be regarded as not having been made or not liable to be made on account of special circumstances. For practical purposes both the following provisions have the same effect.

...

61. Attempts have been made in various decisions of the Tribunal to specify a list of relevant factors to be taken into account as "special circumstances" in the exercise of the discretion under section 1184(1). Clearly, in the light of the Federal Court decisions in Secretary Department of Social Security v Hulls (1991) 22 ALD 570, Secretary Department of Social Security v Smith (1991) 30 FCR 56 and Secretary Department of Social Security v Banks (1990) 20 ALD 19, the Applicant submitted that such attempts can only be seen as providing guidance on the facts of the particular cases concerned, and cannot be elevated to the status of rules of general application. The relevant factors specified in the cases vary from factors couched in quite general terms to quite specific terms.

62. The advocate for the Applicant referred to Re Green and Secretary Department of Social Security (1990) 21 ALD 772 in which the Tribunal listed the factors in general terms as follows:

"...

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

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

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

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

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

63. Re Krzywak and Secretary Department of Social Security (1988) 15 ALD 690 also undertook a comprehensive review of the previous authorities and identified that factors relevant to the discretion which could be broadly grouped as financial hardship, legislative changes, incorrect legal advice and ill health.

64. The term "special circumstances" has also been examined by the AAT and the Federal Court. In Re Beadle and Director General of Social Security (1984) 6 ALD 1, Toohey J stated at 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 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."

65. Special circumstances were also considered in Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 the Tribunal said at N97:-

"...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 [recovery of a debt] in mind, [the decision maker] 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."

66. The SSAT considered that the circumstances which rendered this case different from the usual run of cases was the length of time between the receipt of the compensation and the raising of the debt, together with a change in the Respondent's circumstances in the meantime. The change in circumstances considered to be special, was the fact that the Respondent had taken on the care of her mother which impacted on her ability to earn income.

67. The advocate for the Applicant contended that the length of time taken to raise the debt was entirely the result of Centrelink not having been informed that the Respondent actually received the compensation payment. It appears that the insurance company released the payment to the Respondent's solicitors and the amount of the charge was not remitted directly to Centrelink. The Respondent's solicitors were aware that a charge was applicable, as they requested an estimate of the likely charge prior to the compensation matter being concluded (T10).

68. Information that a lump sum payment had actually been made, was not in Centrelink's possession until a data matching exercise was undertaken on 12 December 2000 (T13). Centrelink then sought to contact the Respondent and then obtained details of the payment from the insurance company. Once all the relevant information was to hand, a decision was promptly made to raise a debt under section 1225 of the Act. Information is sometimes provided to Centrelink which indicates that overpayments of income support have occurred, quite some time after the relevant event. This fact is not in itself a sufficient reason to waive a debt calculated as a result of the information obtained.

69. The Respondent asserted that she expected her solicitors to have taken care of any issues regarding repayment of monies owed. The solicitors wrote to the Respondent dated 7 June 2001 (T22) that they had informed her sister, who was acting on her behalf, that an amount might have to be repaid. Regardless of any shortcomings on the part of the Respondent's solicitors, the insurance company or her sister, the Respondent was not relieved of her own responsibility to inform Centrelink of her receipt of the compensation payment. The Respondent was sent a letter on 30 September 1995 which stated "You must tell us within seven (7) days of you getting your compensation payments........This letter is very important. You should make sure you keep it in case you need to read it again." It has been decided in numerous cases before the Tribunal that incorrect or inadequate legal advice is not a persuasive factor in determining special circumstances. In Re Martin and Secretary Department of Social Security (AAT 6482, 14 November 1990) the Tribunal said in relation to this issue:

"On this issue, I concur with the view of Deputy President Todd in Re Bolton and the Secretary to the Department of Social Security Decision No  5238 of 7 July 1989 (unreported) at p.16:

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."

70. The change in the Respondent's financial situation was also considered by the SSAT to be a special circumstance. The Respondent's income was reduced because she decided to take over the care for her mother, who was previously being cared for by the Respondent's sister. The Respondent's mother apparently has a number of medical problems and cannot, according to the Respondent, be left alone.

71. To qualify as "special circumstances", financial hardship must go beyond "straitened" circumstances and be truly exceptional; Although financial hardship may be grounds for finding special circumstances, it is not a prerequisite to special circumstances: Re Secretary Department of Social Security and Hill (1995) 2(1) SSR 9. The advocate for the Applicant also referred the Tribunal to in Re Brodley and Secretary, Department of Social Security (AAT 7239, 14 August 1991).

72. The Respondent currently receives carer payment at the rate of $416.30 per fortnight, from which is withheld $61.70 to repay her debt. She currently owns her home outright and has no financial dependents. Her mother is in receipt of an age pension and meets her own household expenses. Despite being informed that she could apply for a temporary reduction in the rate of her debt withholdings, the Respondent has chosen not to do so. At the time of the SSAT hearing the Respondent had $2000 in the bank.

73. The Applicant contended that the Respondent's financial circumstances put her squarely on a par with other income support recipients. Indeed, all people who have cause to make a claim with Centrelink for an income support payment, do so because they have suffered a reduction or cessation in their usual income, for one reason or another. This is what happened to the Respondent. She chose to give up her employment and care for her mother, as her sister had married and could presumably no longer do so herself. Laudable though the Respondent's actions are, they do not make her circumstances special. Her financial circumstances are straitened, as are those of all income support recipients, but they are hardly exceptional.

74. In summary, it was submitted on behalf of the Applicant that the Respondent's circumstances are not such that either section 1184 or section 1237AAD of the Act should be invoked.

SUBMISSION: Respondent

75. The Respondent sought to have the whole or part of her compensation payment treated as if it had not been paid pursuant to the discretion in section 1184K of the Act. The discretion in section 1184K may be exercised where it is appropriate to do so in the special circumstances of the case.

76. There are a number factors in the Respondent's case that, when taken together, can be regarded as special circumstances that make it appropriate to exercise the discretion in section 1184K. These factors include:

Statutory liability of the insurance company

It was the contention on behalf of the Respondent that this issue is relevant to whether there are special circumstances that warrant waiver of the debt. The legislation and Applicant's guidelines provide that in situations such as this, liability rests with the insurance company. That the Applicant failed to pursue the insurance company for recovery, and that the insurance company was recently placed into liquidation, are relevant special circumstances. The Applicant was said to be pursuing the Respondent because she is an 'easy target', the Applicant essentially having missed its opportunity to conveniently pursue the insurer.

Departmental error

It was the Respondent's contention that the failure of the Applicant to comply with its own procedures in relation to following up recovery of the compensation charge with the insurance company is also a relevant special circumstance.

77. The Applicant's Guide to Social Security Law at 6.4.10 explains the procedures required to be followed when a compensation charge is not paid to the Applicant.

6.4.10 Failure to Pay Recoverable Amount

Action needed when Centrelink's charge is not refunded

The following table shows the action required if a compensation payment is released without refunding Centrelink's charge. In addition to remaining liable to pay the amount specified in a notice, penalties can also be imposed on the compensation payer or insurer for failing to comply.

If the insurer or compensation payer has... Then...

been served a preliminary notice ONLY, a recovery notice should be served IMMEDIATELY.

been served a recovery notice, the insurer or compensation payer remains responsible for the charge.

NOT been served either notice, a recovery notice should be served on the customer.

been served either notice incorrectly, a recovery notice should be served on the customer.

Recovery from insurance companies and compensation payers

Centrelink MUST:

* CLOSELY monitor the payment of charges, AND

* contact the insurer or compensation payer about outstanding amounts, if necessary.

78. It appears that in this case the Applicant should have sought to recover the charge from FAI, not the Respondent. The failure to follow its internal guidelines is a special circumstance.

79. In Ebrahimi and Secretary, Department of Social Security (AAT 12872, 11 May 1998) the Tribunal waived part of an assurance of support debt primarily on the basis that the applicant failed to follow its internal guidelines in relation to notification of the accruing amount of an assurance of support debt each three months. In Andrews and Secretary, Department of Family & Community Services [1999] AATA 516 and Soriano and Secretary, Department of Family & Community Services [2000] AATA 842 the Tribunal waived assurance of support debts because the applicant failed to advise the debtors, and keep them advised, of the accruing debt.

Department delay

80. The Applicant's failure to follow its guidelines resulted in a three year delay in seeking recovery of the compensation charge. It was submitted that the Respondent had not contributed to this delay.

81. In her November 1998 Newstart Allowance claim form the Respondent answered "No " to the question "Have you claimed, or are you entitled to claim, compensation or damages..." (T27 p77). It was contended that the Respondent correctly answered this question, as she had previously notified the Applicant that she had claimed compensation in 1995 and the compensation claim had been finalised 6 months beforehand. In her Newstart Allowance interview she did advise the Applicant about the money she received from the compensation and she noted this money on her claim form.

82. It was submitted that the three-year delay in seeking recovery of the charge is a special circumstance in light of the Respondent's change of circumstances as documented below.

Insurance company error and solicitor error

83. The debt is due to the insurance company, FAI, and the Respondent's solicitors, releasing a compensation payment to the Respondent without first deducting the compensation charge.

84. FAI was served with a preliminary notice by the Applicant (T6). This notice complied with the requirements in section 1177. This notice advised the insurance company of their obligation pursuant to section 1178 to notify the Applicant within seven days of becoming liable to pay the Respondent compensation. FAI failed to comply with their obligation.

Insurer must notify Department of liability

1178 If an insurer:

(a) is given notice under section 1177 in relation to a claim; and

(b) either before or after receiving the notice, becomes liable to indemnify the compensation payer, either wholly or partly, in relation to the claim;

the insurer must give written notice to the Department of the liability within 7 days after:

(c) becoming liable; or

(d) receiving the notice;

whichever happens later.

Penalty: Imprisonment for 12 months.

Note 1: Subsection 4B(2) of the Crimes Act 1914 allows a court that convicts an individual of an offence to impose a fine instead of, or in addition to, a term of imprisonment. The maximum fine that a court can impose on the individual is worked out by multiplying the maximum term of imprisonment (in months) by 5, and then multiplying the resulting number by the amount of a penalty unit. The amount of a penalty unit is stated in section 4AA of that Act.

Note 2: If a body corporate is convicted of the offence, subsection 4B(3) of the Crimes Act 1914 allows a court to impose a maximum fine of an amount that is 5 times the maximum fine that could be imposed on an individual convicted of the same offence.

85. The Respondent's solicitors were asked in a notice dated 30 September 1995 (T7) to advise the Applicant when the Respondent received her compensation. They failed to do so despite that in February 1998 they requested an estimate of the compensation charge from the Applicant (T10).

86. The Respondent understood that her solicitors were ensuring that all debts, costs and disbursements were paid prior to releasing the remaining compensation money to her. She was unaware that the insurance company had failed to deduct the compensation charge amount.

87. Since the Tribunal's decision in Re Martin and Secretary Department of Social Security (AAT 6482, 14 November 1990), the Tribunal has held that incorrect or inadequate advice from a solicitor can be a relevant factor when considering special circumstances. In Re Secretary Department of Social Security and VYS (1995) 40 ALD 745 the Tribunal enunciated a strong argument for viewing incorrect legal advice as a relevant factor. This position has been accepted in a number of later Tribunal decisions.

88. It was contended that the failure of both the insurance company and the Respondent's solicitors to ensure that compensation debt was repaid to the Applicant prior to releasing to her the remainder of the compensation money constitutes special circumstances.

Change in circumstances

89. It is contended that the significant change in the Respondent's circumstances, from when she was awarded compensation in 1998 and when the charge was raised against her in March 2001, is a relevant special circumstance. In June 1999 the Respondent became the primary carer for her mother and as a result has a reduced earning capacity. She also expended the compensation money on the purchase of a house in August 1999, over 18 months prior to notification of the compensation charge.

90. The Tribunal was referred to paragraph 28 of the SSAT decision where it concluded:

...

From June 1999 there was a considerable shift in her circumstances in that she became responsible for her mother, her ability to earn income was very much reduced and the compensation payment was essentially gone in that it had beep (sic) spent on buying a house. It is the tribunal's view that to require her to repay the compensation charge in these circumstances would be harsh and unjust. (T2 p8)

91. It was contended that when taken in their totality, all the errors in this case by the Applicant, the insurance company and the solicitors; and the substantial change in the Respondent's circumstances, amount to special circumstances that warrant waiver of the debt.

92. In the alternative, the Respondent contends that the debt should be waived pursuant to s1237AAD of the Act due to the special circumstances of the case.

Section 1237AAD of the Act is as follows:

Waiver in special circumstances

1237AAD

The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a) the debt did not result wholly or partly from the debtor or another person knowingly:

(i) making a false statement or false representation; or

(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and

(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c) it is more appropriate to waive than to write off the debt or part of the debt.

93. It was contended that the Respondent did not knowingly fail to comply with any requirements of the Act, or make any false statements. The special circumstances in this case are outlined above.

DISCUSSION AND FINDINGS

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

95. Following the arbitrator's decision (sometimes referred to by the parties as 'the compensation settlement') in relation to a common law damages claim, the Respondent received a payment which was compensation as defined in section 17 of the Act. The total sum awarded to the Respondent before any deductions was $48,386.86.

96. There was no dispute that, if the statutory formula was applied to the Respondent's circumstances, a preclusion period would result from 20 June 1995 to 1 April 1996, during which period the Respondent had been in receipt of benefits, resulting in a debt of $7116.79.

97. Whereas the SSAT found that there were special circumstances in the Respondent's case such that, pursuant to section 1184 the compensation payment should be treated as not having been made, it was the Applicant's position that, there are no special circumstances in the Respondent's case.

98. The Tribunal reviewed the decision in Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211 where Mansfield J, said that section 1184, is designed specifically to enable the Department to ameliorate such unfairness or injustice which results upon the strict application of the Act.

99. The discretion to disregard the whole or part of a compensation payment can be exercised where application of the usual rules would lead to a result that is unfair or inappropriate (see Beadle v Director General of Social Security (1985) 7 ALD 670 and Secretary, Department of Social Security v Hulls particular case.

100. Section 1184(1) is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. Section 1184 of the Act provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard the whole or part of the compensation payment in "special circumstances". Section 1184(1) of the Act reads:

Secretary may disregard some payments

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

(a) not having been made; or

(b) not liable to be made;

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

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

102. The Tribunal turned to consider each of the submitted "special circumstances" in turn.

Statutory liability of the insurance company

103. It was the contention on behalf of the Respondent that this issue, already addressed as a preliminary matter, is also relevant to whether there are special circumstances that warrant waiver of the debt. The legislation and the Applicant's guidelines provide that liability is imposed on the insurance company. That the Applicant failed to pursue the insurance company for recovery, and that the insurance company was recently placed into liquidation, were said to amount to special circumstances.

104. For the reasons discussed in relation to the preliminary matter the Tribunal finds that it remains open to the Applicant to pursue the Respondent, as well as having rights against the insurer. A course open to the Applicant has already been discussed.

105. The Tribunal makes no comment on the allegation on behalf of the Respondent that she is an 'easy target'.

Departmental error

106. The Respondent had contended that the failure of the Applicant to comply with its own procedures in pursuing the insurer is a special circumstance. The Tribunal reviewed Ebrahimi and Secretary, Department of Social Security (AAT 12872, 11 May 1998) to which it had been referred. In that case, the failure to follow internal guidelines was but one of a series of matters which the Tribunal found to warrant Mr Ebrahimi's circumstances as 'special'. In Andrews and Secretary, Department of Family & Community Services [1999] AATA 516 and Soriano and Secretary, Department of Family & Community Services [2000] AATA 842 to which the Tribunal had also been referred were matters where the Department had a duty to take a certain course and failed to do so, thereby disadvantaging the applicant in each case. The Tribunal finds that in the present matter the guidelines are in the nature of procedural advice to officers of the Department as to the appropriate course to be adopted. They do not impose a duty to operate in that fashion and a member of the public cannot require the Department to follow these guidelines.

Department delay

107. There was a delay of some three years before recovery was sought from the Respondent. The Tribunal accepts the Respondent's bona fides in her November 1998 Newstart Allowance claim form (T27) as to whether she had claimed compensation and that she was truthful in recording her assets. She responded in that manner because she had left the details of the aftermath of her compensation hearing to her solicitors and/or her sister. The Tribunal did not accept that this absolved her of her own responsibility to respond to the Department's letter to her of 30 September 1995 (T5).

108. The Tribunal accepts the Applicant's contention that notice of the debt would not have been delayed if the Respondent, and those acting on her behalf, had notified the Applicant of the result of her claim.

109. There was some discussion at the hearing about the 'data matching' exercise undertaken by the Applicant, which brought the Respondent's situation to attention. The ? Tribunal finds that, while it might have more prudent for the Applicant to have undertaken a check of this kind at an earlier date, given it was on notice of an outstanding claim, it was under no duty to do so. 'Data matching' is a strictly controlled tool. The Respondent cannot complain that it was not used at an earlier date.

Insurance company error and solicitor error

110. It was submitted that had FAI or the Respondent's solicitor released the compensation payment to the Respondent after deducting the compensation charge then the Respondent would not be faced with the current debt.

111. This argument is somewhat self-defeating. If the funds had been released to the Respondent after the deduction of the debt the amount the Respondent would have received would have been the payout minus the amount of the debt. (The 'debt' would have been paid by the insurer to the Applicant.) The present application seeks only to put both parties in this position.

112. As to the solicitors' role, the advocate for the Respondent referred the Tribunal to Re Secretary Department of Social Security and VYS (1995) 40 ALD 745 in which the Tribunal was of the view that incorrect legal advice was a relevant factor in considering special circumstances. However, in that case there was clear evidence that the respondents had sought specific advice from their solicitors on two occasions in relation to their obligations vis-à-vis the Department and had been misinformed. In the present matter the Respondent had purported to delegate her responsibilities to the solicitors and had not sought advice.

Change in circumstances

113. It was contended that there was a significant change in the Respondent's circumstances, from when she was awarded compensation and when the charge was raised against her in March 2001 and that this was amounted to special circumstances. The SSAT was of this view.

114. At the time the solicitors advised the Respondent of the Arbitrator's award she had left Australia for overseas. She remained in the Philippines for about six months. On her return, in November 1998, she applied for, and was granted, Newstart Allowance. In June 1999 she became the primary carer for her elderly mother and converted her Newstart Allowance benefits to carer payment. It was submitted that as a result of taking care of her mother she has a reduced earning capacity. (It was noted that before the Arbitrator the Respondent's evidence was that her mother cared for her, and not vice versa). In any event, the evidence was that she had not been engaged in paid work since the Arbitrator's award in mid 1998. On her return to Australia she had gone almost immediately onto Newstart Allowance and then onto carer payment. The Tribunal does not accept that there has been a substantial change in her circumstances.

115. There was also some discussion about her no longer having the funds available to make the repayments to the Department. She has an unencumbered house and is under no pressure to repay the interest free loan with which she supplemented the purchase monies. She has been offered a reduced rate of repayment of her debt but has declined. She has funds in the bank and no debts.

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

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

117. It is not enough for the Respondent to show that she 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.

118. In the Tribunal's view the evidence does not support a contention that there is something unusual in the Respondent 's circumstances that would set her case apart from other recipients of income support. Her current financial position does not, in the Tribunal's view, amount to one which is 'severe'.

119. The Tribunal therefore came to the view that none of the Respondent's circumstances, amounted, alone, to 'special circumstances' for the purposes of exercising the discretion under section 1184. However, in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 162, it was stated by French J that the "concept" of special circumstances was:

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

120. In the present case, the Tribunal finds that, even considering all the factors in the Respondent's circumstances in their totality, were still not 'special' for the purposes of section 1184 of the Act.

121. In the alternative, the Respondent contended that the debt should be waived pursuant to section 1237AAD of the Act due to the special circumstances of the case. That section provides as follows:

1237AAD The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a) the debt did not result wholly or partly from the debtor or another person knowingly:

(i) making a false statement or false representation; or

(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and

(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c) it is more appropriate to waive than to write off the debt or part of the debt.

122. It was contended that the Respondent did not knowingly fail to comply with any requirements of the Act, or make any false statements. While this may be so, the Tribunal has found that there are no special circumstances in this case, such as to make it desirable to waive the debt.

DECISION

123. The Tribunal sets aside the decision of the Social Security Appeals Tribunal and in substitution therefor determines that the Respondent is liable to the Applicant in the sum of $7116.79.

I certify that the 123 preceding paragraphs are a true copy of the reasons for the decision herein of,

MS N ISENBERG, MEMBER

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

Associate

Date of Hearing 15 November 2002

Date of Decision 15 January 2003

Advocate for the Applicant Ms S Mantaring

Advocate for the Respondent Ms J Finlay