Watson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 32 (19 January 2009)

Last Updated: 20 January 2009

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 32

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2008/3474

GENERAL ADMINISTRATIVE DIVISION		)
	Re		DIANNE WATSON

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 affirmed.

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

CATCHWORDS

SOCIAL SECURITY – preclusion period – settlement of compensation claim – lump sum compensation payment includes component referable to lost earnings and capacity to earn – imposition of preclusion period – special circumstances not established – no part of settlement moneys treated as not having been received – preclusion period not shortened – decision under review affirmed.

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

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

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. Dianne Watson is seeking shortening of the preclusion period which Centrelink imposed as a result of her receipt of a compensation lump sum for settlement of her injury compensation claim. Mrs Watson relocated to be near her sister-in-law and bought a townhouse with the proceeds. She spent the rest of the lump sum on a car and other purchases and is left without any finances or means of support. If the preclusion period is shortened, Mrs Watson may then be entitled to some form of social security payment.

REVIEWABLE DECISION

2. On 7 July 2008, the Social Security Appeals Tribunal (‘the SSAT’) affirmed a Centrelink Authorised Review Officer’s (‘ARO’) decision that a preclusion period applied to Mrs Watson which prevents payment to her of compensation affected social security payments until the preclusion period has passed.

ISSUE

3. The issue is whether special circumstances exist which warrant exercise of the discretion to treat the whole or part of Mrs Watson’s compensation payment as not having been made in order to reduce the preclusion period applying to Mrs Watson. This would mean Mrs Watson might claim social security assistance from Centrelink sooner.

CONSIDERATION AND FINDINGS

4. Mrs Watson told the tribunal she was aware that a preclusion period would result from her compensation payout but that she did not realise it would apply for such a long time. She gave oral evidence that she found out that it still affected her when she applied for a health care card, which she needed because her insurer was slow to pay for her medical needs. She told the tribunal the insurer paid her about $300 per month for her medications but they had wrongly stated that she received $700 per fortnight and this stopped her qualifying for a health care card. The insurer had also paid some of her money to the wrong bank account and this was causing her some problems as well. She had asked them to pay into another account because the account they were paying into was overdrawn and she could not access the money.
5. Mrs Watson has multiple health problems but these are mainly the result of her accident for which she was compensated and receives benefits from the insurer. Dr Ian C Arthur provided a certificate, on 24 November 2008, which sets out Mrs Watson’s medications and medical history. Apart from conditions and procedures directly connected with her accident, Mrs Watson suffers various problems including anxiety with depression, obesity and haemorrhoids and she underwent a colonoscopy in October 2008. She also underwent a hysterectomy and an appendectomy, although Dr Arthur does not mention the date of those operations. Associate Professor William Ross also furnished a short report on 1 October 2008. He found no abnormality from the colonoscopy but was going to arrange another appointment to see Mrs Watson again.
6. As well, Mrs Watson is seeing a psychologist, Belinda Roche. Ms Roche prepared a report on 17 November 2008 in which she said that Mrs Watson was referred to her practice for treatment of chronic pain. The practice had counselled Mrs Watson on four occasions, which she attended unaccompanied. Ms Roche observed that Mrs Watson, due to physical pain and emotional problems, namely anxiety and depression, was unlikely to be able to work again in the near future.
7. When asked about the decision to move from her former home, Mrs Watson said she decided to live near her sister-in-law because there had been a family discussion about what would be best. She had been living with her daughter and three grandchildren, who moved into her rented place after they experienced problems. Mrs Watson had found it difficult to cope with this situation and Mrs Watson together with her daughter and sister-in-law all thought it would be better for her to move closer to her sister-in-law. She had thought it best to buy a townhouse rather than rent. It was not an option to live with her sister-in-law but she lived around the corner and helped Mrs Watson and sometimes lent her money. The sister-in-law wrote to the tribunal confirming that she sometimes helped Mrs Watson with aspects of daily living and financially also. She added that Mrs Watson’s daughters could not help her at present but that one of them had redirected money owing to her father to Mrs Watson. Mrs Watson gave evidence that her ex-husband was living in her townhouse at the time of the hearing but that this was a temporary arrangement.
8. When Mrs Watson left her former home, she left behind her furniture because her daughter had none. This meant she had to buy new furniture when she moved to her new townhouse. Her daughter also wrote to the tribunal explaining the problems she had been experiencing and supporting her mother’s claims.
9. When asked if she might sell the new townhouse so that she had more disposable income, Mrs Watson was reluctant to do this. She thought she might not be better off in the long run with having to pay rent. She also explained that she could not leave her daughter and three small children in her old house without any furniture. As to the new car she purchased, Mrs Watson gave evidence that it was a second hand car that cost $14,000 but that it would probably realise only $5,000 on resale now. She said she needed a car to see the doctor and had difficulty getting around because she was obese and used a walking stick.
10. Although Mrs Watson conceded Centrelink wrote to tell her and her solicitors a preclusion period would apply, Mrs Watson claimed she did not know how long it would be. She also claimed her solicitor never told her how long the preclusion would last. Nevertheless, Mrs Watson accepted that Centrelink’s calculation was correct. Mrs Watson simply hoped she might be able to receive some assistance as she was in a bad state physically and financially.
11. A copy of a deed of release on the Centrelink file shows Mrs Watson signed a release for the net sum of $290,000 in 2007. Centrelink received advice from the insurer on 28 September 2007 that a lump sum of this amount was paid to Mrs Watson and that it was wholly or partly in respect of economic loss. The Centrelink officer who recorded the matter decided not to raise any compensation charge as Mrs Watson had not been paid any compensation affected payments. The officer then calculated the preclusion period would extend from 4 August 2007 to 20 May 2011. This information was communicated by letter to Mrs Watson’s solicitor and to Mrs Watson, although the SSAT noted her letter was wrongly addressed. A copy of instructions to settle directed to her solicitor and signed on 31 August 2007 by Mrs Watson and by her solicitor states, on the second page, “I understand that I may be precluded from receiving social security benefits from Centrelink in the future”. Mrs Watson admitted to the tribunal that she was aware of this but did not know for how long she would be precluded.
12. Subsection 17(2) of the Social Security Act 1991 (‘the Act’) states that “compensation” means, various types of payment including any compensation or damages payment. When a lump sum payment is made to a claimant, the compensation part of the lump sum compensation payment is calculated pursuant to subsection 17(3) as 50% of the settlement amount. The duration of the compensation 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 divided by Income cut-out amount. Pursuant to subsection 1169(1) of the Act, a compensation affected payment is not payable to a person during the preclusion period. A “compensation affected payment” is a term that covers benefits and allowances such as disability support pension, newstart allowance and age pension.
13. As Mrs Watson is a person who has received compensation, which includes a component referable to lost earnings or lost capacity to earn, the above social security laws make provision for the imposition of a period during which she is ineligible to receive social security benefits. The issue Mrs Watson raised concerns her present circumstances. The operation of subsection 1184K(1) of the Act enables a decision maker to disregard part or all of the lump sum compensation payment in special circumstances. This will result in the shortening of the applicable preclusion period.
14. 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.

15. Mrs Watson argues it is appropriate in her case to disregard all or part of her compensation receipts so as to do away with or reduce the preclusion period applying to her. Mrs Watson has run out of money and is in poor physical and mental health. When she lodged a statement of financial circumstances on 15 May 2008, Mrs Watson wrote an accompanying letter saying that her ex-husband had moved in with her in the two bedroom townhouse although she wished he was not there. She told the tribunal that he was still living in the townhouse by the time of the hearing in November 2008.
16. Medical evidence before me shows that Mrs Watson is suffering depression and has medical problems and expenses. I note that Mrs Watson said she had trouble paying for all her medication although she receives money towards this from the insurer. I accept her oral evidence that she has no money left from her settlement. However, Mrs Watson has behaved with lack of foresight or even recklessly in the knowledge that she would not be entitled to social security assistance for some time but still she spent most of her money. It is understandable that she would wish to live in the townhouse, which she said had features such as high bench tops that suit her but Mrs Watson gave no evidence of any other enquires she made about finding another home. In addition, she still had considerable funds left after the house purchase but went on spending on other goods and a car without first determining how the preclusion would affect her.
17. Letters from her conveyancer show that she entered into the purchase soon after settling her claim. Centrelink recorded the settlement date at 28 August 2007, which Mrs Watson did not dispute. A deposit of $246,000 was made to her bank account on 16 October 2007 and transferred out on the same day, according to her bank statement. Various other small transfers and debits followed. On 20 December 2007, a withdrawal of $17,650 was made and Mrs Watson explained it was a deposit on the townhouse. A copy of a letter from the conveyancer dated 22 January 2008 requested settlement cheques totalling $162,041 for completion of the purchase on 25 January 2008.
18. 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.

19. 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.

20. I accept that Mrs Watson is in financial hardship, now having no regular income and little savings. 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.
21. As a general rule, people seeking social security assistance are in poor financial circumstances and, by comparison to some, Mrs Watson has assets which she could consider selling or using to fund her living expenses. The Secretary suggested she might sell her townhouse but this is not the only option available to her. She has two bedrooms in the townhouse, one of which she told the tribunal was previously occupied by her ex-husband. She gave further evidence he moved out when he lost his job but now has a new job and sends her some money. She might consider renting out this second room to someone else. She might also investigate whether she could obtain a loan using the house as security and postponing repayment by agreement with the lender. Mrs Watson gave evidence that she receives financial assistance from other family members also.
22. I have not forgotten to take into account that Mrs Watson is suffering depression and has various medical problems and expenses associated with these. However, she does still receive some contribution towards these expenses from her compensation insurer. As well, Mrs Watson indicated in oral evidence she might be eligible for some assistance with her medical expenses once she clears up the mistake in Centrelink’s records about the actual amount she receives from the insurer, that is, $300 and not $700 per instalment. Production to Centrelink of records of her actual receipts from the insurer might clear up any confusion.
23. While it is unfortunate that the preclusion period has not yet run when Mrs Watson needs financial help, I consider there are insufficient grounds upon which I can reasonably find these circumstances are ‘special circumstances’ within the meaning of section 1184K of the Act.

DECISION

24. The decision under review is affirmed.
    

I certify that the 24 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 19 November 2008

Date of Decision 19 January 2009

Applicant’s Representative Self-represented

Respondent’s Representative Ms S Mantaring, Centrelink Legal Services and Procurement Branch