Lahoud and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 30 (19 January 2009)

Last Updated: 20 January 2009

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 30

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2008/2764

GENERAL ADMINISTRATIVE DIVISION		)
	Re		JOSEPH LAHOUD

Applicant

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal

Ms Robin Hunt, Senior Member

Date 19 January 2009

Place Sydney

Decision

The decision under review is set aside and substituted is a decision that the preclusion period should be shortened by 50%.

...................[Sgd]....................
Ms Robin Hunt
Senior Member

CATCHWORDS

SOCIAL SECURITY – age pension – preclusion period – settlement of compensation claim – lump-sum compensation payment includes component referable to lost earnings and capacity to earn – compensation payments ceased – imposition of preclusion period – effect of preclusion period postponed until application for compensation affected payment made – consideration of special circumstances – special circumstances established – decision under review set aside.

Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1184K

Workers Compensation Act 1987 (NSW) ss 40, 66, 67

Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281

Oberhardt v Secretary, Department of Education, Employment and Workplace Relations [2008] FCA 1923

Secretary, Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 66 ALD 147

Secretary, Department of Social Security v Smith (1991) 23 ALD 277

REASONS FOR DECISION

19 January 2009

Ms Robin Hunt, Senior Member

INTRODUCTION

1. Joseph Lahoud is seeking payment of age pension from the date he reached the usual age for this entitlement. Mr Lahoud applied for the pension when he was almost 66 years old but was refused payment because there was a compensation preclusion period in place. The preclusion period arose as a result of the compensation Mr Lahoud had been receiving since he agreed to settle his compensation claim.

REVIEWABLE DECISION

2. The Social Security Appeals Tribunal (‘the SSAT’), on 26 May 2008, affirmed an Authorised Review Officer’s (‘ARO’) decision that a preclusion period applied to Mr Lahoud which prevented payment of age pension until the preclusion period had passed.

ISSUES

3. I must decide whether the preclusion period applies and, if so, whether special circumstances exist which warrant exercise of discretion to treat the whole or part of the compensation payment as not having been made. This would result in the preclusion period being shortened.

CONSIDERATION AND FINDINGS

4. Mr Lahoud told the tribunal he was taken by surprise when he found he was ineligible for receipt of age pension. He did not accept that the preclusion period resulting from a compensation settlement reached many years previously could prevent his entitlement to age pension. Mr Lahoud’s weekly compensation payments ceased on 15 January 2008 when he turned 66 and he had hoped to receive the pension in place of those payments. He applied for age pension on 20 December 2007.
5. On 3 July 2002, Centrelink wrote to Mr Lahoud’s solicitors who acted for him in his compensation case informing them that the likely preclusion period for Mr Lahoud, based on information at that time, would be from 24 February 2001 to 17 August 2001. The letter also explained that the period might commence after weekly compensation payments stopped. Centrelink wrote to Mr Lahoud on 8 August 2002 informing him the preclusion period would apply for 36 weeks once his compensation payments stopped. Centrelink also wrote to his solicitors on the same day requiring repayment of $607.20 in Centrelink payments because of arrears of periodic compensation Mr Lahoud received.
6. Although he and his solicitors had been told a preclusion period would apply, Mr Lahoud told the tribunal he had not realised this would affect him after so many years. His solicitor’s letter to Centrelink dated 27 February 2008 shows they were confused also. His solicitors wrote that the decision to impose a preclusion period was flawed because Mr Lahoud settled his claim for permanent impairment and did not claim weekly payments. They considered the actual weekly payments to Mr Lahoud were voluntary rather than part of the settlement terms. They also suggested any preclusion period would have started on 5 July 2002, being the date of settlement.
7. The terms of settlement reached in Mr Lahoud’s case are among the tribunal documents and show that the settlement sum included weekly payments for partial incapacity as well as lump-sum payments for other elements of the claim. The form of agreement referred to provisions of the Workers Compensation Act 1987 (NSW) (‘the Workers Compensation Act’) and allowed for both pecuniary loss and for pain and suffering. The agreement dealt with reduction in the worker’s weekly earnings due to partial incapacity by reference to section 40 of the Workers Compensation Act and went on to acknowledge 10% loss of use of Mr Lahoud’s right arm and 15% of his left arm for calculation of a lump-sum payment under section 66. A further lump-sum covered pain and suffering pursuant to section 67. Accordingly, I am satisfied that the settlement monies paid to Mr Lahoud meet the definition of compensation under Social Security Act 1991 (‘the Act’) and that payment of age pension is subject to a preclusion period.
8. Whatever the nature of the settlement and the background to the agreement reached, generally the same statutory interpretation of the agreement applies. Even so, I find the usual application of the 50% rule to the settlement is justified in practical terms because the settlement agreement did take loss of earnings into account.
9. Mr Lahoud does not dispute the application of these provisions to his case but I set out some of the main provisions as background. Subsection 17(2) of the Act states that:

(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.

10. The compensation part of a lump-sum compensation payment is calculated pursuant to subsection 17(3) as 50% of the payment. The duration of the preclusion period is determined in accordance with the provisions of section 1170. Subsection 1170(4) states that the number of weeks in the lump-sum preclusion period is calculated on the basis of the formula:

Compensation part of lump sum Income cut-out amount

11. Centrelink informed Mr Lahoud by letter on 17 January 2008 that the income cut-out amount referred to in subsection 1170(4) was that which applied at the date of settlement, being $592.50 on 5 July 2002, a figure which I accept as correct as no material before me suggests otherwise. In accordance with the formula in subsection 1170(4), the duration of Mr Lahoud’s preclusion period was calculated at 36 weeks in accordance with the provision in subsection 1170(5). As the preclusion period commences on the day after the periodic payments ceased in accordance with subsection 1170(1), I accept as correct the Centrelink calculation that the preclusion period commenced on 16 January 2008 and ceased on 23 September 2008 after 36 weeks.

SPECIAL CIRCUMSTANCES

12. Where a person receives compensation, which includes a component referable to lost earnings or lost capacity to earn, social security laws make provision for the imposition of a period during which the age pension and other allowances and benefits are precluded. Special circumstances may permit reduction of the period where its effect is unduly harsh or unfair. The main issue raised by Mr Lahoud concerns the operation of subsection 1184K(1) of the Act, which makes provision for disregarding part or all of a compensation payment. This will result in the shortening of the applicable preclusion period. Subsection 1184K(1) reads:

(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.

13. Mr Lahoud argues it is appropriate in his case to disregard all or part of his compensation receipts so as to do away with or reduce the preclusion period applying to him. He has given evidence about his problems. In summary, Mr Lahoud has run out of money, is addicted to gambling, is in poor physical and mental health and has separated from his wife, although still living under the same roof and accepting some financial responsibility for her. As well, Mr Lahoud is distressed about a serious illness affecting his adult daughter. Marital separation led to loss of assets. He also suffers from guilt about wasting a large amount of money. Mr Lahoud coped without any social security assistance while he was in receipt of compensation payments until he reached pension age.
14. Mr Lahoud produced a copy of the terms of settlement to which he and his wife agreed on 20 January 1995 and lodged with the Family Court for consent orders. Under these terms, payment of a lump-sum to his wife by way of alienation of property interest and maintenance occurred. They also sold the marital home and Mr Lahoud must now pay rent or rely on others for his accommodation.
15. The medical evidence before me is that Mr Lahoud is suffering depression and has considered suicide. I accept Mr Lahoud’s oral evidence that he has reached this unfortunate state. Mr Lahoud agreed he had a lot of money available to him including an inheritance of $81,000 and has been living rent free for the last 7 years. Despite this, Mr Lahoud has dissipated his funds. Bank statements show that Mr Lahoud had only $5,117.82 remaining on 25 August 2008. Mr Lahoud gave evidence to the effect that he was keeping $5,000 set aside for his funeral.
16. There have been several inconsistencies in Mr Lahoud’s evidence but, on the whole, I accept that he is in a very difficult financial situation and is estranged or separated to a degree from his wife. I also accept Mr Lahoud’s evidence that his landlords recently asked him to pay rent of $125 per week (1/2 of $250 per week of which his wife pays the other half). Mr Lahoud also has medical expenses and his compensation payments have ceased to cover these. Dr Barrie Davey certified on 6 September 2008 that he had seen Mr and Mrs Lahoud for a variety of medical problems and that they both suffered anxiety disorder and depression. He confirmed Mr Lahoud’s gambling addiction and inability to pay for all the therapies and treatments. Dr Chandramohan, on 12 August 2008, also certified that Mr Lahoud was under his care for exacerbations of anxiety states with depression and insomnia and was on medications since February 2008. Dr Chandramohan gave a certificate about Mrs Lahoud as well. I have no doubt Mr Lahoud would benefit from attending a pain clinic which has been recommended for him and there are other medical treatments which he cannot afford.
17. In a statement of financial circumstances, dated 31 August 2008, Mr Lahoud listed the expenses he had incurred since the cessation of compensation. Recent expenses included $500 per fortnight for food and household goods and $120 per fortnight for petrol. Mr Lahoud did not describe the car for which he needs petrol and he set out no travel expenses although he gave oral evidence that he travels by train to see his daughter regularly. He referred to payment of maintenance of $120 per fortnight although the terms of settlement recite payment of lump-sum maintenance to his estranged wife in 1995. Mr Lahoud gave evidence about repayment of loans to family and friends and writes in the statement that he owes $9,100. Three persons made statutory declarations that Mr Lahoud owed them money.
18. He attached a more detailed handwritten sheet to this statement, and the list included house and contents insurance, the usual household services, car registration and insurance among other things, such as medications and treatments that he could not afford. He gave further evidence about losing money in gambling at various clubs and casinos. He also states that he owes back rent and debts although his oral evidence was that the landlords only recently requested rent. In the statement, Mr Lahoud also says that he can not afford treatment and therapy for both his wife and himself and supplied medical certificates. This part of the statement indicates that Mr Lahoud still supports his wife despite their formal separation in 1995 and the large sums of money he paid to her in settlement.
19. Some of Mr Lahoud’s health problems are the result of the accident for which he was compensated and to find these should be borne by the taxpayer amounts to double dipping. Mr Lahoud gave evidence that he did not have back and shoulder surgery that was recommended while he was receiving compensation. He was reluctant to undergo surgery and is still thinking about it. One reason he did not proceed was that he was worried about the risk that an operation might go wrong and leave him worse off, maybe a paraplegic. Currently, he is also intending to follow up recommended pain management as an option. He said he had an appointment with Dr Davey about this after the date of the tribunal hearing.
20. The purpose of the discretion to disregard some payments in special circumstances has been the subject of judicial comment. See for example, Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281-282 per von Doussa J and Secretary, Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 66 ALD 147 at 148 per Heerey J. Such provisions have been described as operating as a:

.....fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.

21. Similarly, such provisions have been described as a safeguard against “double dipping” in that:

People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source.

22. Mr Lahoud has unfortunately reached a stage where he is in financial hardship, now having no regular income and little savings and being asked to pay rent. However, financial hardship will not generally constitute a special circumstance unless the financial hardship goes beyond straitened circumstances and is truly exceptional. See Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281.
23. I appreciate that from Mr Lahoud’s point of view it is difficult to comprehend that he should be disqualified from receipt of age pension by events that occurred so many years previously. The compensation payments Mr Lahoud was receiving may have been predicated on his being able to live on retirement income or age pension once he reached the age of 66 but this is not discernable from the settlement terms. However, Mr Lahoud has no other source of income now that the compensation payments have stopped.
24. When asked what difference it would make if he received the amount from Centrelink affected by the preclusion period, estimated at around $7,000, Mr Lahoud said it would be of great help to him. If he received the estimated amount, it would mean he could use it on medical treatment and medication. On the other hand, his friend who represented him conceded there was no guarantee he would not succumb to his gambling addiction and waste the money.
25. There have been cases where gambling addiction has been considered special circumstances, particularly where there is psychiatric evidence. Mr Lahoud does have a gambling problem but he admitted that he attended only two counselling sessions as he thought they were doing no good. The counsellor wrote, on 13 August 2008, that the option of continuing for a third session is still available to him should he wish to take it up in the future. On balance, I think Mr Lahoud’s case is not one where his gambling addiction alone means his compensation receipts should be disregarded. He has not made a continuing effort to overcome his addiction.
26. The preclusion period has now passed. If Mr Lahoud otherwise qualifies for age pension, his previous compensation receipts will no longer prevent payment to him. He also may qualify for a greater rate of age pension on the basis that he is single and not a member of a couple, if that is his actual status. Now that he has been asked to pay rent, he may also qualify for rent assistance. These are options which Mr Lahoud may wish to pursue and which may be justified according to his evidence but which are outside my review.
27. I also have borne in mind Mr Lahoud’s suggestion during the hearing that he thought he might have been entitled to disability support pension (‘DSP’) before he applied for age pension. Had he made a successful claim, the preclusion period might have expired before he reached pension age. Spender J recently held in the case of Oberhardt v Secretary, Department of Education, Employment and Workplace Relations [2008] FCA 1923, that a notional entitlement might be taken into account in a claim of special circumstances made under section 1237AAD or its neighbouring provisions of the Act for possible waiver of a debt. I distinguish Mr Lahoud’s situation not simply because his claim involves another legislative provision but because there is insufficient evidence before me that Mr Lahoud would have qualified for DSP. Some of his oral evidence suggests otherwise, such as his evidence that he did not undergo surgery recommended by his doctors, which might mean his condition was not fully treated or permanent for the purposes of DSP.
28. It is most unfortunate that the preclusion period did not commence until the time in Mr Lahoud’s life when he needed financial help. On balance, I consider there are sufficient grounds upon which I can reasonably find ‘special circumstances’, within the meaning of section 1184K of the Act, warrant reduction of the period. This will give Mr Lahoud a small amount of money to address his most immediate problems of paying rent and helping with some medical expenses.

DECISION

29. The decision under review is set aside and substituted is a decision that the preclusion period should be shortened by 50%.
    

I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of Ms Robin Hunt, Senior Member

Signed: ..........................[Sgd]...........................

Jennifer Wong, Associate

Date/s of Hearing 22 December 2008

Date of Decision 19 January 2009

Applicant’s Representative Mr A Khamis

Respondent’s Representative Mr K Bullock, Centrelink Legal Services and Procurement Branch