Kuzet and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 159 (10 March 2011)

Last Updated: 11 March 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 159

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2010/4481

GENERAL ADMINISTRATIVE DIVISION		)
	Re		Cedo Kuzet

Applicant

And

Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

Respondent

DECISION

Tribunal

Ms N Bell, Senior Member

Date 10 March 2011

Place Sydney

Decision

The decision under review is affirmed.

...................[sgd]...........................
Ms N Bell, Senior Member

CATCHWORDS - Social Security - Disability support pension - compensation preclusion period - special circumstances

Social Security Act 1991

REASONS FOR DECISION

Ms N Bell, Senior Member

1. Cedo Kuzet was injured in a workplace accident in March 2004. In
   April 2008, Mr Kuzet settled his workers compensation claim in the amount of $290,000 from which he received $170,000 after payment of costs and disbursements. In April 2010, Mr Kuzet applied for disability support pension. His claim was rejected by Centrelink on the basis that he is subject to a compensation lump sum preclusion period from 12 April 2008 until 9 December 2011 during which Mr Kuzet may not be paid any social security benefit.
2. The issues for me to consider are therefore whether the compensation preclusion period prescribed by section 1170 of the Social Security Act 1991 has been correctly calculated and, if so, whether there are any special circumstances that warrant the exercise of the discretion in section 1184K of the Act to disregard part or all of the compensation lump sum.

WAS THE COMPENSATION PRECLUSION PERIOD CORRECTLY CALCULATED?

3. Sections 17(3) and 1170 of the Act prescribe a formula for the calculation of the period for which a social security payment may not be paid to the recipient of a lump sum compensation payment. The formula operates by dividing 50% of the compensation lump sum, in this case 50% of $290,000 ($145,000), by the income cut-out amount, that is, the maximum amount a person may earn before a social security payment is no longer payable. In April 2008, that income cut out amount was $756.75. The result of this is 191.61 or 191 weeks for which Mr Kuzet may not be paid a social security payment, commencing on 12 April 2008, being the day after he received his compensation lump sum. This period ends on 9 December 2011.

ARE THERE SPECIAL CIRCUMSTANCES?

4. Section 1184K of the Act provides that part or all of a compensation lump sum may be disregarded when calculating a preclusion period if there are special circumstances. Special circumstances are circumstances that are unusual or extraordinary.
5. Mr Kuzet told the Tribunal that after payment of $120,000 in legal costs and disbursements, he spent his settlement monies to as follows:
   • (a) $95,000 on the discharge of his mortgage over his 2 bedroom unit with a garage which he bought in 2002 for $175,000;
   • (b) $25,000 on a holiday to his homeland to seek spa therapy treatment for his injuries;
   • (c) Approximately $5,700 for the renovation of his home unit, which remains unfinished;
   • (d) $15,000 for the discharge of some personal debts to relatives; and
   • (e) $10,000 for taxes and duties owing on an inherited property in Croatia.
6. Mr Kuzet said that after this expenditure he has had little money to pay for his day to day living expenses and produced to the Tribunal a range of outstanding notices for utilities and a bank statement showing a balance of $9.70 with no transactions for the preceding 6 months. When asked whether he had other bank accounts, Mr Kuzet answered that he did not. Mr Kuzet also said that he stopped purchasing his pain medication a year ago as a result of his lack of income.
7. Mr Kuzet estimated the value of his unit to be approximately $180,000. He said that he had sought an appraisal of his unit by his friend who is a real estate agent who advised him to complete the renovations he had commenced so he can realise a sale price of $50,000 more. Mr Kuzet described the renovations that he commenced to include:
   • (a) Lowering the ceiling 7 centremetres to allow for new air conditioning ducts and light fittings;
   • (b) Removing existing floor coverings and replacing them with floor boards;
   • (c) Replacing all the internal doors;
   • (d) Replacing the kitchen.
8. My Kuzet stopped these renovations approximately one year ago when he says he ran out of funds. He said the unit remains unfinished but habitable with only the hallway and the second bedroom without new flooring.
9. When asked whether he had investigated the possibility of renting one of the rooms to a lodger in order to obtain some income, Mr Kuzet said that the people he had offered a room to were not willing because there are no doors to the bedrooms or bathroom. He said that he had taken down the internal doors of the unit with the intention of replacing them and had thrown them out. Since then, Mr Kuzet said that he has not had the money to purchase new doors and have them installed.
10. Mr Kuzet said that his solicitor did not inform him of any preclusion period at the time of his settlement and as a result he had no knowledge that he would not be entitled to social security payments. He also said he did not receive the Centrelink advice of the preclusion period dated 6 June 2000 that was addressed to his unit because he was overseas at the time and the person who was meant to collect his mail in his absence failed to do so. As a result, his mail including, presumably, any advice from Centrelink was unreadable.
11. However, I note that Mr Kuzet settled a compensation claim in 2000 and was subject to a compensation preclusion period for which Centrelink recovered a portion of the settlement figure and imposed a period of non payment of benefits. When it was put to Mr Kuzet that given he has been subject to a preclusion period previously, he must have been aware that he would be subject to another preclusion period for this settlement, he said that on this occasion he just did not think of it.
12. When asked why he did not claim disability support pension until two years after the commencement of the preclusion period, Mr Kuzet said he had expected his medical conditions would improve and he would return to work. Rather, he said, his conditions have worsened.
13. Mr Kuzet also said that he suffers from depression and back pain. He said that since his settlement in 2008, he has become quite nervous and aggressive. He said he was not like this prior to 2008. However, I note that on 17 September 2007, Dr Thomas Tjeuw diagnosed Mr Kuzet as suffering from “depressive symptoms, anxiety and frustration resulting from the injuries”. They are conditions that were present at the time he received his compensation sum.
14. Unfortunately, it is not unusual for a person who has had an accident for which they have been compensated to have accumulated some debts or to have continuing physical and psychological limitations or medication requirements. While it may have been to Mr Kuzet’s immediate financial advantage to apply his compensation monies to the discharge of his mortgage, that is not the purpose of compensation for work injuries. Mr Kuzet pointed to the savings he made in mortgage interest payments – something in the order of $30,000. However, the purpose of the lump sum was compensation for loss of earnings. The moneys were for his general up-keep and expenses. His unit is now unencumbered and even improved but he has divested himself of his means of support.
15. The aim of the legislation is to avoid the double payment of people who have been compensated for injuries. Mr Kuzet has had previous experience of a preclusion period. His medical conditions, for which he has been compensated, do not amount to special circumstances. Continuing effects of injuries are unfortunately commonplace. Mr Kuzet exhausted his compensation lump sum on the expectation that he would be able to find more work. That this has not come about, is neither unusual nor extraordinary. It is not unusual for a person who has been compensated for injuries to remain unable to work.
16. Mr Kuzet’s circumstances are not special within the meaning of section 1184K of the Act.

DECISION

17. The decision under review is affirmed.
    

I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Senior Member

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

Associate

Date of Hearing 1 March 2011

Date of Decision 10 March 2011

Solicitor for the Applicant Unrepresented

Solicitor for the Respondent Ms Raewyn Harlock, Centrelink Legal Services