O'Neill and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 619 (21 August 2009)

Last Updated: 21 August 2009

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 619

ADMINISTRATIVE APPEALS TRIBUNAL )

) No: 2009/1064

GENERAL ADMINISTRATIVE DIVISION )

Re Kieren O’Neill

Applicant

And Secretary, Department of Education, Employment and Workplace Relations

Respondent

DECISION

Tribunal Ms N Isenberg, Senior Member

Date 21 August 2009

Place Sydney

Decision The decision under review is set aside. In substitution, the Tribunal decides that the preclusion period ends as of the date of this decision.

..............[sgd]................................
Ms N Isenberg,
Senior 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 – compensation payments spent – applicant’s circumstances ‘special’ – decision under review is set aside.

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RELEVANT ACT/S:

Social Security Act 1991 – ss 17 and 1184K

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CITATIONS

Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876; (2000) 65 ALD 211

Beadle v Director General of Social Security [1984] AATA 176; (1985) 7 ALD 670

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

Haidar v Secretary of Social Security [1998] FCA 994; (1998) 52 ALD 255

Groth v Secretary of Social Security [1995] FCA 1708; (1995) 40 ALD 541

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

Krzywak and SDSS (1988) 15 ALD 690

Re Martin and Secretary, Department of Social Security [1990] AATA 768, 14 November 1990

Re Marsh and Secretary Department of Family and Community Services [2004] AATA 228

Re Secretary Department of Social Security v Rodgers [1992] AATA 131

Re Magallanes and Secretary, Department of Social Security [1995] AATA 456

Re Dunn and Secretary, Department of Family and Community Services [2005] AATA 404

Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793

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REASONS FOR DECISION

21 August 2009	Ms N Isenberg, Senior Member
Decision under review

1. The reviewable decision is a decision of the Social Security Appeals Tribunal (SSAT) dated 12 April 2009, which affirmed the decision of Centrelink to impose upon the Applicant a compensation preclusion period from 15 March 2005 to 7 May 2012.

Basic facts

2. On 19 March 2003 Mr O’Neill was injured in a motor vehicle accident. On 20 October 2006 the Motor Accidents Authority awarded him $463,325 in compensation. Of this, $334,455.00 was awarded for past and future economic loss, and $33,265.54 was for legal costs and disbursements. An amount of $68,605.04 was paid back to the insurer for periodic compensation payments received and $21,884.32 was paid back to Centrelink. In total Mr O’Neill received ‘in the hand’ $339,570.10
3. On 21 November 2006 Centrelink determined Mr O'Neill was subject to a preclusion period from 15 March 2005 to 7 May 2012, the effect of which is that he would have no entitlement to Centrelink benefits during that time.
4. However, it appears that by February 2008 Mr O'Neill had spent all the money and he made enquires with Centrelink about claiming disability support pension.
5. Mr O’Neill formally applied for disability support pension in December 2008 but his claim was refused by Centrelink because of the preclusion period. That decision was affirmed on internal review and by the Social Security Appeals Tribunal.
6. At the hearing, the applicant appeared in person, while the respondent was represented by Ms Jennifer Galbraith of Centrelink. The documents before the tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (the T documents), taken into evidence, and other documents tendered by the parties at the hearing. The applicant gave oral evidence in person.

Applicable law

7. Section 1169 of the Social Security Act 1991 (the Act) deals with compensation payments during a lump sum preclusion period. Subsection 1169(1) relevantly provides:

(1)  If:
                     (a)  a person receives or claims a compensation affected payment; and
                     (b)  the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.

8. Section 17 of the Act contains the definition of compensation. It is defined to include a payment for damages, or a payment in settlement of a claim for damages, that is made in respect of lost earnings or lost capacity to earn resulting from personal injury (Section 17(2)). Section 17 also contains the law in respect to how much of the compensation payment is to be applied to the calculation of the preclusion period. If payment is made by way of settlement, either by consent judgement or otherwise, then 50% of the payment is assessable (Section 17(3)(a)). Alternatively, the compensation part will be determined from however much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn, or both (Section 17(3)(b).
9. Briefly, the scheme of the legislation is aimed at preventing those receiving lump sum compensation payments for loss of income from receiving benefits from the public purse. In this case, Mr O’Neill received $334,455 for economic loss. This amount is the “compensation part of the lump sum” and is then used, by application of a statutory formula, to calculate a period of time during which a person will not be eligible to receive Centrelink payments. This is called “the preclusion period”. If, during the preclusion period, the person has received Centrelink payments then the Act creates a statutory charge over the settlement funds to the extent of the payments made. The licensed insurer is obliged to pay the amount of the charge to Centrelink in priority to payments to the person entitled to the benefit of the settlement. Solicitors routinely make enquiries of Centrelink prior to any settlement to ascertain the preclusion period and the amount of any statutory charge.
10. 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”, as follows:

Secretary may disregard some payments

1184K(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.”

Issues before the Tribunal

11. There was no dispute that $334,455 of Mr O’Neill’s compensation payment was for economic loss. $68,605.04 of this amount was paid back to the insurer for periodic compensation received and thus leaving an amount of $265,849.96 to which the formula could be applied. Accordingly, the statutory formula was applied by the Respondent to Mr O’Neill’s circumstances, resulting in a preclusion period from 15 March 2005 to 7 May 2012.
12. It was agreed between the parties that the central issue in this matter was the application of section 1184K of the Social Security Act 1991, that is, whether there are any “special circumstances” in Mr O’Neill‘s case to reduce the length of the preclusion period.

Evidence before the Tribunal

13. I had before me documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which I took into evidence.
14. In addition, the following documents were tendered:
    • Patient Health Summary dated 27 July 2009;
    • Letter from Dr Marc Russo of Hunter Pain Clinic.
15. Following settlement of a compensation claim in respect of a work accident, Mr O’Neill received a lump sum payment which was compensation as defined in section 17 of the Act. The total sum awarded to Mr O’Neill before any deductions was $463,325.
16. There was no dispute that, if the statutory formula was applied to Mr O’Neill’s circumstances, a preclusion period would result from 15 March 2005 to 7 May 2012

Applicant’s Evidence

17. Mr O’Neill gave evidence that he had really enjoyed his job driving a small van, doing deliveries. After the accident he was hospitalised only for a short period of time but he undertook intensive the physiotherapy 4-5 times a week for a couple of years. He experiences severe pain in his neck and lower spine. He has tried various treatments for his back, such as acupuncture and physiotherapy. His pain is such that he has been referred to the Hunter Pain clinic. He has been prescribed long term narcotic pain killers: endone. These, according to Dr Russo, produce side effects of drowsiness and are addictive. Since the accident he has also developed sciatica, arthritis and also his blood pressure is high. He required extensive dental work at a cost of about $9,000.
18. Mr O’Neill told me that his solicitors advised him about the preclusion period, but he did not really understand what it was about. He found the [litigation] process to be very stressful and he just wanted to ‘be done with it’ and to ‘get away from [the solicitors]’. He said in cross-examination that he never thought about what would happen. He was so relieved that the proceedings were over and that he was able to do things he had not been in a financial position to do since the accident. Until he received the compensation payments he had had to live frugally because he was struggling financially. His compensation payments had been erratic and sometimes he would go for 2-3 months without receiving anything. He had lived with his brothers and was unable to pay his bills so had borrowed from friends and family, with one brother lending him $10,000. This caused tension within the family and as a result he is now estranged from one brother. His relationship with his friends is similarly affected. He could no longer afford to live in Sydney and moved to the Central Coast because it would be cheaper. His father, with whom he had previous had little contact also lived there and he had hoped that their relationship might improve, but after staying with his father for a couple of months, that relationship floundered. He is now estranged from his entire family.
19. He became angry at his condition and frustrated with his financial situation. He did not discuss his feelings with his doctor.
20. He said he knew the money had to last him until 2012. He had hopes of buying a small flat, but found that the prices were such that he would have nothing left to live on. He had arranged an appointment with the bank about investing the money but it was too stressful to think about so he did not attend. The money went into a savings account.
21. He said the compensation money gave him confidence to socialise again.
22. Unfortunately, he began to drink heavily – to the point of blacking out – as a means of dealing with his pain. He had smoked marijuana for 1½ years after the accident in an attempt at pain relief but found it ‘isolating’. Although at first it assisted with the pain it ‘didn’t agree with [him]’.
23. He also started gambling, which he used as a means of ‘switching off’ and meant he did not have to ‘come up with conversation’. He spent up to $1000 per day at the club. He would find that he would be drinking for his pain, but was unable to continue in the one position and so would move to the poker machine area to move around. He denied having a gambling problem before that time, although he agreed he had gambled socially with friends. He had used the TAB as a cash banking facility, and denied that he had gambled to excess prior to having the compensation money. He has not sought any assistance from his doctor or elsewhere about his gambling.
24. He agreed with the expenditure outlined to the SSAT. He estimated that he spent $19,700 on household goods including furniture, white goods, electrical goods, including a computer. Amongst other things, he spent $7,000 on furniture, $2500 on a refrigerator, washing machine and dryer, $3500 on a television, stereo and DVD and $2,500 on a computer and printer. He also spent $1300 on air-conditioning. The SSAT accepted that some were essential items: the bed, refrigerator and washing machine. However, this seems to have been because Mr O'Neill had told the SSAT that after he moved to his own rented premises he had to buy "everything such as furniture, white goods and household goods as he did not own anything". In fact, Mr O'Neill gave evidence that he had resided at the same rented premises in Toukley since 6 December 2005 when he first moved into his own accommodation on the Central Coast.
25. The Secretary contended that Mr O'Neill had extravagantly fit-out the premises he had been renting since December 2005 with new household and electrical goods, but I do not necessarily consider that expenditure to be ‘extravagant’.
26. Mr O'Neill also spent $20,000 of his lump sum on a car and $13,000 on a motorcycle. He also used $10,000 of his lump sum to purchase a car for his father. He told the SSAT he "bought a car for his father in the hope that his father would visit him, but this did not eventuate". Mr O'Neill advised the SSAT he spent $5,000 on presents for his nephews and nieces and deposited money into their bank accounts.
27. Mr O'Neill told Centrelink that he spent $15,000 repaying a loan to his brother, although he told the SSAT he repaid a debt of $30,000 to his brother whom he lived with while he was receiving Centrelink benefits. He also told the SSAT that he repaid money to friends but could not remember how much.
28. He agreed that the bank statements demonstrate some travel around New South Wales and Queensland. He said he went with a friend and only one hotel was good and the rest were ‘cheap’. He was asked about some expenditure in Phuket, but said he had purchased a discount voucher but had allowed a friend to use it, ie that he himself did not travel overseas.
29. There is now nothing left of the compensation funds and he agreed that at least $170,000 was unaccounted for. He is $1900 behind in his rent and is being threatened with eviction. He has sold all of his assets such as his desk and computer just to make some payments so as to avoid immediate eviction. He has no plans as to what he will do in the likely event he is evicted. He received charity assistance to pay for his electricity.
30. He also has a credit card debt of over $5000 (and another of about $2500) and is being pursued by a debt recovery agency. He owns a mobile phone but has no credit.
31. He has lost a significant amount of weight and now rarely drinks because he cannot afford it.
32. He currently has a health care card. For several months though he went without medication because he could not afford to have the prescription dispensed. For example he had not taken his blood pressure medication because it is the most expensive of the medication he has been prescribed. His pharmaceutical bills with the health care card are slightly under $300 per month.
33. He has received no financial counselling. He feels guilty for having spent all the money and was clearly distressed during the hearing. He admitted he had no one to blame but himself and that he had not realised how much trouble he is in. He has not sought assistance from his doctor about his current distress.

Consideration

34. The respondent submitted that there are no special circumstances in Mr O’Neill’s case such that the discretion to disregard parts of the compensation payments pursuant to section 1184(1) of the Act should be exercised.
35. I reviewed the decision in Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876; (2000) 65 ALD 211 where Mansfield J, said that section 1184, (as it then was) was designed specifically to enable the Department to ameliorate such unfairness or injustice which results upon the strict application of the Act.
36. 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 [1984] AATA 176; (1985) 7 ALD 670, which explored the meaning of the phrase ‘special circumstances’ and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570).
37. 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] FCA 994; (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] FCA 1708; (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).
38. Mr O’Neill received no financial advice from his solicitors when he received the money, but it is arguably not their role to provide such advice. It is evident that he had limited understanding of financial matters. He received a great deal of money, and he was, probably like many recipients of settlement monies, ill-equipped to manage his funds for a period of 7 years. For the vast majority of those recipients there is no court-administered investment training and each person must do his or best. Mr O’Neill, for one reason or another, attempted to get financial advice, but did not proceed. I accept his evidence that he investigated buying a property, which would have been an admirable use of the funds, but the funds were inadequate to invest in that manner.
39. Also, I accept Mr O’Neill’s evidence about his anxiety in wanting the whole (litigation) process to be concluded. Further, although there was no medical evidence of a psychiatric condition, it was clear from his evidence and that of his doctor and the pain management specialist that he had, and continues to have, significant problems adjusting to his pain and the limitation upon his functioning, which his conditions have brought about. In addition, he has new conditions which have come about since the compensation payment. His conditions require expensive medication, and he is unable to pay for them in the absence of Centrelink support.
40. The SSAT was not satisfied that Mr O’Neill had explored all possible work opportunities available to him nor pursued all options for financial assistance such as friends, family members and charities. I have come to a different view. He was assessed by a job capacity assessor on 7 July 2009 and found to qualify for the Disability Support Pension (DSP) in that, inter alia, he has a continuing inability to work more than 8-14 hours per week and that he has significant limitations on any work he could undertake given his conditions. As to avenues of financial assistance: he is estranged from his family, and now that he has no money, his friends appear to have deserted him. He has received some financial assistance from a local charity to pay his electricity account. Some further assistance will be needed to avoid eviction in the event he receives no Centrelink benefits.
41. Financial hardship may be grounds for finding special circumstances. To qualify, however, financial hardship must go beyond "straitened" and be truly exceptional (Krzywak and SDSS (1988) 15 ALD 690). There was no issue that Mr O’Neill’s current financial situation is dire. Since the SSAT hearing he has sold everything he owns in an attempt to alleviate his financial situation.
42. The issue is whether Mr O’Neill’s circumstances can be said to be special when he is responsible for those circumstances.
43. Mr O'Neill was aware that the money was to last until 2012 but he nevertheless spent it all in about 6 months. I accept that he needed some expensive dental work and paid for the physiotherapy and other treatments for his back and neck pain. Some of his purchases though may have been somewhat extravagant. Both Centrelink and the SSAT were critical of his repayment of debts, but this, in my view, is not necessarily a matter for which he is to be unduly criticized. He also spent quite a lot on trips around country NSW and Queensland.
44. Of greater concern is that he chose to gamble away the bulk of the money. Where expenditure has been sufficiently extravagant or unwise as to be unreasonable it has not been found to constitute special circumstances: Martin and Secretary, Department of Social Security [1990] AATA 768 (14 November 1990); Re Marsh and Secretary Department of Family and Community Services [2004] AATA 228 (5 March 2004.)
45. I was referred to decisions where the Tribunal had declined to find special circumstances where there has been expenditure on holidays, drinking and gambling: Secretary Department of Social Security v Rodgers [1992] AATA 131 (23 April 1992), Re Magallanes and Secretary, Department of Social Security [1995] AATA 456 (3 March 1994) Re Dunn and Secretary, Department of Family and Community Services [2005] AATA 404 (5 May 2005). This case differs from Magallenes and Dunn in that in those cases the applicants had substantial assets that could be sold, whereas Mr O’Neill has nothing. It also differs from Rodgers because there the applicant was capable of work, and also because the applicant’s wife received a small amount in wages and also some child support and child disability allowance. The family was not completely destitute, unlike Mr O’Neill.
46. It is true that had Mr O’Neill carefully invested the money, then he would have had sufficient funds to tide him over at a reasonable standard of living until the completion of his preclusion period. If that preclusion period is shortened because of his reckless spending then that may invite others in similar circumstances to do likewise and thereafter become dependent on the public purse. One could anticipate the public outcry: per Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793. It is equally true though that the public would be concerned to learn that Mr O’Neill has been forced in to a life on the streets, because there is no other option available to him. He is destitute, cannot work and his family and friends have deserted him. The dilemma is to decide where the burden of the support for Mr O’Neill should fall: the taxpayer or charity? He has already turned to charity, and received relief to pay an electricity bill. He may have to seek assistance to avoid eviction. These are ‘one-off’ type payments that those donating to, and those administering a charity may countenance. It is not the role of a charity to support any one person in toto for a period of years.
47. After evaluating Mr O’Neill’s current financial, health and family situation, I have therefore come to the view that, when considered together, they possess that particular quality of unusualness that permits them to be described as special.

Conclusion

48. In addressing the essence of discretion nominated in section 1184K(1) of the Act, I conclude that Mr O’Neill’s circumstances are such that part of Mr O’Neill’s compensation payment, being an amount which would result in Mr O’Neill’s preclusion period ending on the date of this decision, be treated as not having been made.
49. I note that on 23 June 2009 I granted a stay of the preclusion period, with the effect that Mr O’Neill has been receiving Centrelink benefits from that date. It is intended that the effect of this decision is that Mr O’Neill will be entitled to be considered eligible to receive Centrelink benefits from today’s date and that benefits paid to him pursuant to the stay will be repayable to Centrelink. It is anticipated that Centrelink would achieve this recovery, over time, by way of deductions from Mr O’Neill’s benefits.

Decision

50. The decision under review is set aside. In substitution, I decide that the preclusion period ends as of the date of this decision.
    

I certify that the 50 preceding paragraphs are a true copy of the reasons for the decision herein of,

Signed: ....................[sgd].................................................

Renee Wallace, Associate

Date/s of Hearing: 29 July 2009

Date of Decision: 21 August 2009

Solicitor for the Applicant: Self Represented

Solicitor for the Respondent: Jennifer Galbraith, Centrelink