Kalayzich and Secretary, Department of Education, Employment and Workplace Relations [2011] AATA 409 (17 June 2011)

Last Updated: 17 June 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 409

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2011/0694

GENERAL ADMINISTRATIVE DIVISION		)
	Re		ANGELO KALAYZICH

Applicant

And

SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal

Mr R G Kenny, Senior Member

Date 17 June 2011

Place Brisbane

Decision

The Tribunal affirms the decision under review.

...............[Sgd]...................
Senior Member

CATCHWORDS

SOCIAL SECURITY – Pensions, benefits and allowances – Settlement of compensation claim – Lump-sum compensation payment included component referable to lost earnings and capacity to earn – Imposition of preclusion period – Monies expended through gambling – Special circumstances not established – No part of settlement treated as not having been received – Preclusion period not shortened – Decision under review affirmed

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

Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25
Davis v Secretary, Department of Family and Community Services [1999] AATA 84
Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Males and Secretary, Department of Family and Community Services [1999] AATA 863
Re Nguyen and Secretary, Department of Family and Community Services [2004] AATA 249
Re PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2008) AATA 381
Re Secretary, Department of Family and Community Services and Jones [2003] AATA 505
Re Secretary, Department of Family and Community Services and Pearce [2003] AATA 972
Re Secretary, Department of Family and Community Services and Peak [2003] AATA 1212
Re Secretary, Department of Family and Community Services and Rankin [1999] AATA 496
Re Secretary, Department of Family and Community Services and Spencer [2004] AATA 248
Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745
Ryan and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 1126
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147; [2001] FCA 1160
Secretary, Department of Social Security v Smith (1991) 23 ALD 277
Stavrakis v Secretary, Department of Family and Community Services [2003] AATA 212

REASONS FOR DECISION

17 June 2011

Mr R G Kenny, Senior Member

1. On 2 April 2008, Angelo Kalayzich injured his left shoulder in a workplace accident. Mr Kalayzich pursued a common law claim against his employer, which settled on 17 June 2010 in the total amount of $248 620.66. On 22 June 2010, his solicitor advised Centrelink of the settlement. Following the injury, until 10 August 2009, Mr Kalayzich had received periodic compensation payments amounting to $53 497.64. He then received income support payments in the form of Newstart Allowance, under the Social Security Act 1991 (Cth) (the Act), amounting to $12 383.07 from 11 August 2009 until 23 August 2010. The final such fortnightly payment was $468.80. Mr Kalayzich received his settlement monies on 27 August 2010.
2. In October 2010, Mr Kalayzich contacted Centrelink about reclaiming Newstart Allowance. On 8 October 2010, a Centrelink delegate determined that, as a result of his receipt of a lump sum payment, Mr Kalayzich was subject to a preclusion period from 11 August 2009 until 9 January 2012. The effect of that decision was that Mr Kalayzich was precluded from receiving certain forms of income support payments, including Newstart Allowance, in that period. The decision was affirmed by an authorised review officer on 11 November 2010 and, in turn, by the Social Security Appeals Tribunal (the SSAT) on 8 February 2011.

LEGISLATION AND ISSUE FOR DETERMINATION

3. Where a person receives a compensation payment which includes a component referable to lost earnings or lost capacity to earn, provision is made in the Act for the imposition of a period during which certain income support payments are precluded. Mr Kalayzich does not dispute the application of the relevant provisions of the Act concerning the calculation of the preclusion period imposed upon him. These provisions are set out in ss 17, 1169 and 1170 of the Act. Section 1170(4) requires the number of weeks of the preclusion period to be calculated by applying the formula:

compensation part of lump sum

income cut-out amount.

4. Centrelink determined that the compensation part of Mr Kalayzich’s lump sum was $97 561.51 and the income cut-out amount was $772.10. Application of the formula led to a preclusion period of 126 weeks, which equates to the period from 11 August 2009 until 9 January 2012. Mr Kalayzich does not dispute those calculations and I am satisfied that they have been correctly made.
5. The issue raised by Mr Kalayzich relates to the operation of s 1184K(1) of the Act, which makes provision for disregarding all or part of the lump sum payment. This would result in the shortening of the applicable preclusion period. It reads:

Section 1184K Secretary may disregard some payments
(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.

EVIDENCE

Mr Kalayzich

6. Mr Kalayzich lives by himself in Brisbane in a house owned by his parents for which he pays no rent, but is responsible for the expenses associated with the house such as payment of council rates. He has two children: a boy aged 15 with whom he has no contact, and a girl aged 12 who stays with him every second weekend. He has been assessed for child support payments for the children but is currently in arrears.
7. When he was injured, Mr Kalayzich was working as a motor mechanic. He has not worked since but is hopeful of gaining future employment. In that, he is hampered by a chronic pain syndrome in his left shoulder which is a legacy of his work injury. For this, he takes pain-killing medication in the form of Oxycontin, Endone and Tramal, as prescribed by his treating doctor. He described the Oxycontin as being a slower-acting form of Endone. He feels tired constantly and his treating doctor has explained that this is a side-effect of his medication. He described himself as feeling “depressed” but said that he had not been diagnosed with any psychiatric condition. His evidence was that the cost of his medication and periodic consultations with his treating doctor is approximately $170 per month.
8. After all relevant expenses had been taken out of his lump sum settlement payment, including legal costs, periodic compensation payments and the monies he had received from Centrelink, Mr Kalayzich was left with approximately $103 000. He said that, before he received the payment on 27 August 2010, his solicitor made him aware of the likely imposition of a preclusion period and he knew that he would not be able to receive Centrelink funds during that time. After receiving his settlement payment, he was advised by Centrelink that he was “on his own” from then on and he knew that the $103 000 would have to see him through until January 2012. He believed that this would not be sufficient and, although he had no history of gambling, he decided to take to gambling at blackjack and on poker machines at casinos to increase the amount available to him.
9. An early pattern of winning, which yielded Mr Kalayzich a profit of approximately $5000, was not sustained. Within six weeks, his lump sum was expended. He attended gambling venues by himself with sums of money in the order of $10 000. It was not his practice to gamble until he had no funds left on his person, and frequently left the premises after losing money but while still in possession of a significant sum. He was aware that his available fund was depleting quickly but he felt that he was capable of winning it back. Mr Kalayzich agreed that he had been reckless with his gambling behaviour but believed that he was acting under the effects of the medication he was taking for his shoulder pain.
10. Currently, Mr Kalayzich has approximately $200 available to him. This is the residue of an amount of $3000 he borrowed from a friend after his lump sum was spent. He has not been tempted to gamble since then and has managed the borrowed monies by carefully spending on necessities only. He owns the furniture in the house in which he lives. He has a car which was gifted to him by his father in late 2010 and believes that it is valued at approximately $15 000. The car’s registration is in his name but he does not feel that he owns it as he does not wish to accept it as a gift. He said that, if the car were sold, he would be morally bound to pay the monies realised from the sale to his father. He also said that he would not accept financial assistance from his parents and that he had not sought help from Centrelink counsellors or any charitable organisations.
11. Mr Kalayzich agreed that, after his injury and before his settlement, he had managed for about 12 months on Centrelink payments totalling approximately $12 000 per year and was aware that he had only some 16 months of the preclusion period to serve after he received his lump sum in August 2010.

Other evidence

12. Mr Kalayzich provided an undated medical certificate from Dr K Wong, his treating doctor. It notes that Mr Kalayzich has a regional pain syndrome in his left shoulder as a result of his injury in April 2008. This was described as a permanent condition for which he takes the medication Oxycontin, Endone and Tramal. Dr Wong considered that Mr Kalayzich was unfit for work.
13. Also in evidence were pharmacy receipts for Mr Kalayzich’s medication purchases and copies of leaflets setting out information on Endone and Tramal.^[1] This included the side-effects for each of these medications. The more common side-effects of taking Endone are listed as confusion, drowsiness, constipation, vomiting and nausea. For Tramal, the side-effects are vomiting and nausea, constipation, dizziness, drowsiness, headache, sweating, fatigue, tiredness and dry mouth.
14. Mr Kalayzich also provided copies of various newspaper clippings relating to the prospects of changes in legislation concerning the operation of poker machines.

SUBMISSIONS

15. Mr Kalayzich submitted that he was a victim of government policies that encourage gambling in order to maximise revenue. He referred to various newspaper articles which were critical of government policy and which advocated legislative intervention to control gambling practices. He was also critical of the absence of any support mechanisms to assist persons in his position. While agreeing that he had acted recklessly in spending his available fund so quickly, he submitted that he must have been under the influence of his medication at the time. He also submitted that this made his circumstances special and that it would be unfair for him to be forced to sell any of his assets in order to maintain himself until January 2012.
16. Mr McQuinlan, for the respondent, submitted that Mr Kalayzich was fully aware of the need to preserve his funds to maintain himself from August 2010 until January 2012. He noted that he had done so on Newstart Allowance payments of approximately $12 000 for one year and that the settlement sum equated to approximately 8 years of such payments. He submitted that Mr Kalayzich had made a conscious choice to gamble and that there was no material which pointed to his being addicted to gambling at any time or to any psychiatric condition which may have been responsible for his continued gambling. He submitted that Mr Kalayzich acted recklessly in losing money at an average rate of some $16 000 per week. Mr McQuinlan submitted that Mr Kalayzich was the author of his own misfortune and that his circumstances were not special such that taxpayers’ money should be used to support him for the remaining months of the preclusion period. He submitted that this was particularly the case because Mr Kalayzich was not in straitened circumstances in that he had assets available to him. Mr McQuinlan submitted that this included his car which, if sold for the value ascribed to it by Mr Kalayzich, would realise sufficient funds to enable him to maintain himself until January 2012.

CONSIDERATION

17. As noted above, it has been conceded by Mr Kalayzich that the provisions of the Act by which a formula is applied to compensation payments, in order to calculate the length of a preclusion period, have been properly applied. Having considered the relevant material in the Centrelink files, I am satisfied that these concessions are properly made.
18. Those 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.^[2]

19. Similarly, they 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.^[3]

20. Those considerations must be kept in mind when determining, for the purposes of applying s 1184K(1) of the Act, whether or not special circumstances arise in a given case. The issue of special circumstances arises in various parts of the Act. In the context of other parts of the Act, it was observed that what is required is:

... something to distinguish ... [the] ... case from others, to take it out of the usual or ordinary case. ... It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.^[4]

21. That observation is equally applicable to s 1184K(1) of the Act. Accordingly, there must be something about Mr Kalayzich’s situation which makes it unusual or uncommon such that it distinguishes it from the ordinary or usual case.^[5]
22. Centrelink files confirm that Mr Kalayzich received his settlement payment of $103 000 on 27 August 2010 and reveal that he requested information about receiving income support payments on 1 October 2010. In that five-week period, he lost almost all of his settlement monies through gambling. He was made aware, both before and after 27 August 2010, that he was precluded from receiving Centrelink payments until January 2012. He understood that limitation yet engaged in his reckless course of conduct by gambling.
23. Mr Kalayzich suffers from a pain syndrome which precludes him from obtaining employment. Those consequences are directly related to the injuries for which he was compensated. It is not an unusual or uncommon consequence that the compensated condition would lead to those outcomes such that the discretion under s 1184K(1) of the Act should be enlivened.^[6] Mr Kalayzich takes medication which he believes influenced his conduct. He provided no medical evidence to support his belief and it is not supported by the documents he provided on the side-effects of that medication.
24. Financial hardship is a relevant consideration in this matter. However, this will not generally constitute a special circumstance unless the financial hardship goes beyond straitened circumstances and is truly exceptional.^[7] No documentary evidence, such as bank statements, was provided by Mr Kalayzich about his financial situation. His evidence is that he now has none of his settlement monies left. However, although he is responsible for the outgoings on the property, he has the benefit of the generous rent-free provision of housing by his parents. He has been able to sustain himself through the benevolence of a friend who loaned him $3 000 and is not pressing him for repayment. He also has a motor vehicle which he considered to be worth $15 000. I have noted his reluctance to accept that he owns the vehicle. However, it is registered in his name and he is the legal owner with the capacity to sell it if he so chooses. His situation does not equate with being beyond those of straitened circumstances.
25. There have been cases where financial hardship brought about through the influence of a psychiatric condition on a person’s conduct has been found to satisfy the terms of s 1184K(1) of the Act. With many of these, there existed a psychiatric condition which compelled the gambling^[8] or led to a state of intoxication during which the gambling occurred.^[9] There is no evidence that Mr Kalayzich has suffered from alcohol abuse or dependence, nor is there any evidence of any underlying pathological basis for his continuation of gambling. While Mr Kalayzich made several references to depression, the documents explaining the side-effects of the medication he takes do not implicate the medication in being responsible for depression. Indeed, there is no evidence to support a diagnosis of depression or any other psychiatric condition in Mr Kalayzich. In any event, his conduct reflects a capacity to control the extent that he gambled. There were times when he was able to leave a gambling venue even when he had a large sum of money with him. He has also been able to cease gambling after he borrowed money from his friend and has been able to apply that money for his own maintenance without gambling.
26. I accept as correct Mr McQuinlan’s submission that Mr Kalayzich’s gambling constituted a conscious but reckless exercise of choice by him and I am satisfied that his engagement in that activity does not amount to a special circumstance under s 1184K(1) of the Act.^[10] When considering the discretion in s 1184K(1) of the Act, all relevant circumstances are to be taken into account.^[11] I am satisfied that there are no circumstances, either individually or in conjunction with each other, that are special such as to meet the requirements of s 1184K(1) of the Act.

DECISION

27. The Tribunal affirms the decision under review.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member

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

Danielle Armstrong, Research Associate

Date/s of Hearing 25 May 2011

Date of Decision 17 June 2011

Applicant was self-represented
Solicitor for the Respondent : Rick McQuinlan, departmental advocate

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^[1] The leaflet referred to the medication as Tramedo.
^[2] Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281 – 282.
^[3] Secretary, Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 66 ALD 147 at 148.
^[4] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545.
^[5] Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25 at [33].
^[6] See Re PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381.
^[7] Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321.
^[8]Re Males and Secretary, Department of Family and Community Services [1999] AATA 863.
^[9] Re Secretary, Department of Family and Community Services and Spencer [2004] AATA 248; Re Nguyen and Secretary, Department of Family and Community Services [2004] AATA 249; Re Secretary, Department of Family and Community Services and Pearce [2003] AATA 972.
^[10] See Re Secretary, Department of Family and Community Services and Rankin [1999] AATA 496; Re Secretary, Department of Family and Community Services and Peak [2003] AATA 1212; Re Secretary, Department of Family and Community Services and Jones [2003] AATA 505; Stavrakis v Secretary, Department of Family and Community Services [2003] AATA 212 at [19]; Davis v Secretary, Department of Family and Community Services [1999] AATA 84 and Ryan and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 1126 at [23].
^[11] Davis v Secretary, Department of Family and Community Services [1999] AATA 84.