Bruinger and Secretary, Department of Social Services (Social services second review) [2017] AATA 1244 (10 August 2017)

1. On 10 January 2017 the Applicant sought a second review by the Tribunal - Exhibit 1 T1 p.1.
2. A hearing was convened on 10 July 2017 in Brisbane. The Applicant appeared in person, was self-represented and called no witnesses. The Secretary, Department of Social Services (the Respondent) was represented by Mr Rick McQuinlan, Senior Government Lawyer. Mr McQuinlan also called no witnesses.

1. The Act contains provisions dealing both where a person, the recipient of social security payments, receives a lump sum compensation payment and where a person who has received a compensation payment subsequently applies for social security.
2. The Act is focused either on recovery of social security paid, or preventing the payment of social security during the preclusion period. The principle underpinning these provisions is that "double dipping" should not be allowed, and that a person should not simultaneously obtain the benefit of a compensation payment while still receiving the benefit of a social security pension or allowance.
3. The Commonwealth Parliament enacted legislation with the specific objective of ensuring that if a person receives a compensation payment for economic loss, the recipient should draw on those funds for a reasonable period before again benefitting from social security payments.
4. This overriding objective was explained by Deputy President Burns in Secretary, Department of Social Security and Winterbotham [1990] AATA 808 at [19] as follows:

"This particular piece of legislation....was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse...Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the taxpayer."

1. Subsection 1169(1) of the Act provides that if a person receives a "compensation affected payment" and also receives a lump sum compensation payment, then the compensation affected payment is not payable to the person during the lump sum preclusion period. The term "compensation affected payment" is defined in s 17(1) of the Act to mean one of a number of enumerated pensions and allowances. Paragraph 17(1)(aa) of the Act provides that an age pension is a compensation affected payment.
2. Subsection 17(2) of the Act contains an expansive definition of "compensation", including a payment of damages, a payment under a scheme of insurance or compensation under a State law, a payment in settlement of a claim for damages under such a scheme or any other compensation or damages payment.
3. It is not contested that the Applicant received compensation payments as defined by s 17(2) of the Act
4. The compensation part of a lump sum payment is defined by s 17(3) to be 50% of the payment if it is made in settlement of a claim related, inter alia, to an injury. The 50% rule was designed to avoid manipulation of the system by obscuring the economic loss component of the payout. Parliament therefore deemed 50% to be in respect of economic loss - Secretary, Department of Social Security v Banks (1990) 20 ALD 19 at 24 per von Doussa J.
5. Subsection 17(4) provides that where a person has been paid weekly compensation by an insurer pending the settlement of a compensation claim, and this is subsequently repaid by the person, then the repaid periodic compensation is to be deducted when calculating the preclusion period.
6. In this matter the Applicant was paid $125,219.77 in weekly compensation by Workcover - Exhibit 1 T12 p.99, and this sum was recovered, with other statutory benefits, from the compensation settlement. When Centrelink calculated the preclusion period, the "all up" compensation payout of $640,000 was reduced by $125,219.77 to the amount of $514,780. The 50% rule was applied to this reduced amount, and accordingly the compensation part of the payout was calculated to be $257,390.
7. The calculation of the lump sum compensation preclusion period is made pursuant to s 1170 of the Act. Subsection (4) provides that the number of weeks in the lump sum preclusion period is calculating by using the formula:

1. If the number calculated by using the above formula is not a whole number, it is to be rounded down to the nearest whole number - s 1170(5) of the Act.
2. In this matter Centrelink applied the above formula and calculated a preclusion period of 273 weeks, running from 16 October 2013 until 8 January 2019 - Exhibit 1 T19 p.119.
3. The Applicant raises no objective ground for challenging the soundness of the calculation of the compensation preclusion period by Centrelink. Both in this matter and in earlier proceedings, the Applicant argued that the law was unfair and that he deserved the age pension having worked all his life after leaving school at the age of 15 - Exhibit 1 T1 p.1. While the Applicant's submissions are understandable, they do not in any way amount to a contention that Centrelink was misapplying the law.
4. I therefore find that the Applicant was subject to a compensation preclusion period, and that the length of that period as calculated by Centrelink was correct.
5. However, the key issue to be addressed flows from the operation of s 1184K of the Act, which vests in the Respondent the discretion to treat the whole or part of a lump sum compensation payment as not having been made or not liable to be made if the Respondent thinks it appropriate to do so in the special circumstances of the case.
6. In short, the matter to be determined by the Tribunal is whether the evidence discloses "special circumstances" which would allow the disregarding of part or all of the lump sum payout, thereby shortening the preclusion period.
7. "Special circumstances" is not defined in the Act, but it has generally been accepted that "special circumstances" are "unusual, uncommon or exceptional" or "markedly different from the usual run of cases" per Toohey J, Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3. The discretionary nature of the "special circumstances" provision requires a consideration of the particular facts and merits of each case. Certainly in undertaking this exercise the Tribunal is required to consider the scope and purpose of the compensation preclusion provisions so as to avoid making determinations that would frustrate the legislative intent - Re Ivovic (1981) 2 ALN 95.
8. However, Branson J cautioned against overstating the test by emphasising "exceptional" - Ryde v Secretary, Department of Family and Community Services [2005] FCA 866. Her Honour said (at [26]):

"the statutory requirement for 'special circumstances' discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness...must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case."

1. This approach was also endorsed more recently by Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; 100 ALD 9 at [33]:

"...the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word 'exceptional' is emphasised. It was not the intention of parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words 'unusual' or 'uncommon' are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case."

1. Although these cases concern different provisions in the Act, their approach to what constitutes special circumstances applies with equal force to those words in s 1184K - Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 at 580-581 per O'Loughlin J.
2. Finally, reference can be made to the decision of French J (as he then was) in Secretary, Department of Employment and Workplace Relations v Homewood [2006] FCA 779; 91 ALD 103. His Honour outlined how the Tribunal should address the question whether special circumstances in the context of s 1184K exist (at [34]):

"The decision before the tribunal in this case arose under s 1184K of the Act. It was necessary to the exercise of the power conferred by that section that the tribunal identified 'special circumstances of the case' in which it thought it 'appropriate' to treat the whole or part of the relevant compensation payment as not having been made. In giving its reasons for a decision under that section to treat the whole or part of a compensation payment as not being made it would be expected, consistently with s 43, that the Tribunal would:

1. Identify the circumstances of the case which it found to be 'special' and the reasons for which it arrived at that finding.
2. Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.
3. Explain why it selected the particular quantum (that is the whole or part) of the compensation payment as not having been made."

1. The Applicant was born in 1949 and in his early years grew up in Tasmania. He finished high school in 1965 and was engaged in employment until his accident in 2011. In short, the Applicant from the age of 15 until the age of 62 was an ordinary working citizen who contributed to society and was not a drain on the public purse.
2. The Applicant lives alone in rental accommodation. His wife passed away in circa 2011. He has one daughter who is 19 years of age and who lives with friends. The Applicant told AAT1 that he planned for his daughter to move in with him in 2016, but this had been delayed until February 2017. At that time he was of the view that she would help contribute towards his rental payments - Exhibit 1 T1 p.6. It would appear that this has not come to pass.
3. At AAT1 the Applicant stated that his rental payments would be $340 per fortnight from January 2017. He also informed AAT1 that as well as his other household bills, he pays $35 per week for medications - Exhibit 1 T1 p.6 at [10].
4. The Tribunal admitted into evidence a document "Compensation Recovery Statement of Financial Circumstances" dated 24 May 2017 which was prepared by the Applicant - Exhibit 6. This document purports to outline what the Applicant's financial circumstances were at May 2017.
5. Question 15 of the document asks if the person has any special circumstances that should be taken into account in reassessing the claim. The Applicant made the following statement:

"Because of accident I was left disabled with no way of ever earning an income, I have had a few Govt people look at the formula and the figures that the Dept Centrelink have used and they note many inaccuracies. The same bill does not suit everyone. The newstart and age pension that was granted me was entirely paid back in full. I and my doctors know that soon I will be on oxygen 24 hrs a day and possibly in a nursing home. In 1965 as I left school, I was told that you work 50 yrs, pay high taxes and retire on a pension. I worked 50 years paid high taxes - 1/3 tax for single man 65-72. No super for first 30 yrs. Now have pulmonary fibrosis from working conditions. So I ask how much has this review cost so far with high salaried public servants too afraid to admit their mistake."

1. Question 16 asks how the Applicant's settlement monies have been spent.
2. The biggest item of expenditure disclosed was the purchase of a 2006 BMW modified vehicle from a deceased estate. At the hearing, the Applicant explained that as a result of the injuries he suffered he can no longer drive a standard vehicle. If he had not purchased the modified BMW he would not be able to have any independent driving capacity.
3. Other expenditure items included an adjustable bed ($2400), mattress ($1200), reclining lounge chairs ($4200) and dining chairs ($1300). Again, the Applicant explained at the hearing that each of these items were specifically purchased because of his physical disabilities and were essential to ensure that he can continue to live, as best as he can, a normal existence.
4. The next biggest item of expenditure after the motor car was $7400 for his brother's funeral expenses. The Applicant explained that his brother, who died in Tasmania, was penniless and the Applicant paid all the costs for his funeral and burial.
5. The same form also lists the valuable assets owned by the Applicant. Apart from the modified BMW, the Applicant owns an aluminium boat with a 10 hp motor and homemade trailer which he valued at $2300 and a 1996 Toyota Hilux Trayback Utility which he valued at $3000.
6. The Applicant disclosed that as at 24 May 2017 he had three bank accounts, with the respective balances of $2112.00, $63.98 and $15,000.
7. The Applicant informed the Tribunal at the hearing that he then had about $11,000 in his third bank account and claimed he would be "broke" in approximately two months.
8. This, of course, leads to the next question, as to how the Applicant's compensation payout came to be expended as quickly as it apparently has.
9. The first issue that was clarified at the hearing was the amount of money, after all legal and other expenses, the Applicant actually received. The Applicant stated that the amount was approximately $168,000.
10. The Applicant informed the Tribunal that he purchased an oxygen machine from Gumtree for $2700.
11. During the time between his accident and the payout, the Applicant was reliant on domestic help. The Applicant claimed that he incurred debts of approximately $40,000 on this form of help. He said that he paid $123 per day during the week and $155 on weekends for "Deal an Angel" which involved a person coming into his home for three hours a day and undertaking all the domestic duties he needed (washing, cleaning, making beds, preparing food etc). He also engaged a home "handyman" who would mow the lawns and do gardening tasks.
12. The Applicant's current expenses include $20 per week for lawn mowing, $60 per week for housekeeping, $25 per week for dog food, $100 per week for groceries and $65 per week for medicines. General credit card expenses are $30 per week, while electricity is $2400 per annum, gas is $320 per annum, telephone expenses are $140 per month and rent of $360.
13. The Applicant is a sick man who will continue to suffer from a myriad of medical problems with concomitant declining health and general well-being.

1. There have been a number of Federal Court and Tribunal determinations which have dealt with the many factors that can be taken into account when exercising the special circumstances discretion. Clearly, any attempt to enumerate such factors can only be indicative, at best. Whilst a checklist of factors based on previous decisions and determinations is helpful as a guide, the discretion vested in the Tribunal is broad and not subject to statutory limitation. Consequently, any attempt to arbitrarily limit or restrain the exercise of this discretion would not only be futile but legally impermissible.
2. The many cases and determinations do not require the Tribunal to find that special circumstances exist simply because an applicant is in straitened financial circumstances. Whilst it is open for a Tribunal member to find that special circumstances exist in such a circumstance, there is no obligation to do so. The Tribunal is required to consider all matters, and straitened financial circumstances is one factor, albeit an important one, but certainly not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:

"The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common: they will be impecunious and in straitened circumstances. Very often their stories will be quite tragic."

1. Other factors which may outweigh straitened financial circumstances include the consideration of the general administration of the social security system (Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114) and whether an applicant's disposition of their compensation payment has been reckless (Davis and Secretary, Department of Family and Community Services [1999] AATA 84).
2. In this matter the Applicant is 67 years of age. His wife is dead and his only daughter does not live with him. He does not have a family network to support him.
3. The Applicant rents a property and has relatively few belongings. His major assets included a modified car, special furnishings, an aluminium boat and an oxygen machine. Out of a total compensation payout of $640,000, after paying some of his debts he only received $168,000. Even then he had owed money to his carers. Due to the disabling nature of the injuries he suffered in 2011, he can no longer work and has had to purchase items of equipment essential for his daily living. Ironically, due to the cancellation of the age pension, his overall living expenses have increased.
4. The Applicant will soon be in a situation where the last of the compensation payout moneys will be expended. He can sell his modified car and belongings for a small amount of money and prolong the inevitable by a few months. Then, having become destitute and incapable of independent living, the taxpayers of the Commonwealth will have to intervene and prevent the Applicant from living a life on the streets.
5. The preclusion provisions are designed to prevent double dipping and ensure that persons receiving a compensation payout do not arrange their affairs so that the Australian community is rewarding profligate spending or reckless behaviour. The manner in which the special circumstances discretion has been exercised over the years has, inevitably, focused on subjective considerations as well as the obvious objective ones. The key subjective considerations all relate to the behaviour of an applicant after receiving a compensation payout. This will be dealt with further below. However, for present purposes, the material before the Tribunal indicates that the Applicant is in financial hardship, and if the preclusion period is allowed to run until January 2019, the Applicant will become homeless and, provided his heath does not totally fail, an even bigger financial burden on the Australian community due to the fact that he will need significantly more help than he needs now.

1. There have been a number of Tribunal decisions that have dealt with persons who have squandered their compensation payments on drugs, alcohol or gambling. Where evidence is presented to the Tribunal that an applicant has been grossly irresponsible, and such irresponsibility does not of itself arise from a psychiatric condition or an intellectual incapacity to manage money, then this militates against a finding of special circumstances: Davis and Secretary, Department of Family and Community Services [1999] AATA 84 and Gartside and Secretary, Department of Social Services [2017] AATA 45.
2. There is no evidence before the Tribunal that the Applicant has acted in a profligate or irresponsible manner in the use of his compensation payout. At first blush it appeared to the Tribunal that the Applicant's expenditure figures were more than would be expected of a person of his age and health. However, when the nature of his expenditure was examined in greater detail during the hearing, it became clear that the Applicant's expenditure was within the bounds of what would be expected. For example, the purchase of a BMW, which many would perceive as a luxury item, was simply the purchase of a specially modified second-hand vehicle which allows the Applicant to drive. Then, the expenditure of $7400 on a trip to Tasmania appeared excessive, until it was explained that the trip was to attend the Applicant's brother's funeral and the bulk of the money involved paying for the costs of the funeral as the deceased brother was impecunious.
3. I therefore find that the Applicant's use of his compensation payout has been reasonable and he has neither been profligate or irresponsible in the manner of the disposition of that payout.
4. A further factor that has been considered in various Tribunal determinations is ill health. Whilst ill health is, of itself, not necessarily determinative it can be an important consideration. The width of the discretion is broad and "extends to all the circumstances of the case" including ill health - Secretary, Department of Social Security v Thompson [1994] FCA 1477; (1994) 53 FCR 580 at 586 per Einfeld J.
5. The Applicant is in bad health, and according to Dr Hill he is undergoing pharmacotherapy for progressive idiopathic pulmonary fibrosis. It would appear that the Applicant suffers from a range of medical conditions, and when he was "run over" by a truck in 2011, he suffered a number of serious physical injuries which not only have caused ongoing chronic pain, but have limited his mobility and had a deleterious impact on his other conditions. In short, he presents as an elderly man suffering from a variety of ailments not susceptible to being cured, but which are being managed.
6. Two Tribunal determinations are of relevance in this context. The first is Secretary, Department of Social Security and Galea [1993] AATA 326; 35 ALD 749. The applicant was a reformed heroin user who had settled down and had a partner, family and a home. Both the applicant and one of the children were sick, and the evidence before the Tribunal was that if the preclusion period was enforced the family home would have to be sold with deleterious impacts on both the applicant and the family. The Tribunal found there were special circumstances.
7. The second Tribunal determination is Secretary, Department of Social Security and Turner [1993] AATA 160. The applicant in this matter had purchased a home from the proceeds of his payout, but would be forced to sell his home with potentially disastrous health consequences both for him and his family. Again, the Tribunal found special circumstances.
8. This matter is different in that there is no suggestion that the Applicant will be forced to sell a home, as he does not own one. However, if the preclusion period is enforced, he will be left destitute and have to give up his rental property. The ongoing stress that will necessarily flow from losing his accommodation and being left destitute would have serious ramifications for any person, let alone someone in the position of the Applicant whose health is fragile at best.
9. I therefore find that the enforcement of the full preclusion period would result in severe stress for the Applicant with potentially serious health ramifications.

1. The Applicant throughout the long review process has protested at the disparity between his payout figure ($640,000), the deemed economic loss component (50% rule: $257,390) and the actual amount he received after most, but not all, repayments and disbursements ($168,000). It is not open for the Applicant to challenge the efficacy of the 50% rule, its fairness or appropriateness. It is a legislative deeming provision and must be applied. This was explained by Kiefel J (as she then was) in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67; (2002) 116 FCR 348 at 353-354 as follows:

"Here the factual assumptions upon which the calculations are based, including that which treats 50% of the total compensation payment as representing the economic loss component, could not have been intended to be subject to rebuttal in the process of applying the formulae. The statutory purpose is to overcome the need in each case to determine what part of a lump sum compensation payment in truth represents economic loss. Although the assumptions to be made and the result reached are necessarily arbitrary, it is a course which has been taken for administrative simplicity."

1. However the key question is whether the contended unfairness of the 50% rule can be a factor in determining whether there are special circumstances. It is clear from a perusal of the various Federal Court decisions that the mere fact that the actual amount received by an applicant is less than the deemed economic loss (50%) is not a special circumstance per se. Conversely, the argument that a decision-maker can never take into account what was actually received by way of compensation for economic loss in considering the circumstances of the particular case is also incorrect - see Kiefel J in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67; (2002) 116 FCR 348 at pp.354-355.
2. Examples of where the Federal Court have considered the operation of the 50% rule and determined that special circumstances existed include Secretary, Department of Social Security v Smith [1991] FCA 280; (1991) 30 FCR 56 and Kertland v Secretary, Department of Family and Community Services [1999] FCA 1596; (1999) 95 FCR 64.
3. However, as Kiefel J explained in Chamberlain (at 355) these were unusual cases and she opined that the unfairness highlighted in those cases "would not seem to me a situation which would often arise and sets these cases apart from the usual".
4. In this instance the amount of deemed economic loss was in excess of the amount the Applicant actually received. This of itself does not result in a finding of special circumstances. Clearly there are a number of troubling aspects in this matter. The Applicant received a net figure which was less than 30% of the compensation awarded. Further in applying the 50% rule it would appear that Centrelink did so without subtracting the significant legal costs which the Applicant had to pay. However, even taking into account all of the above, the clear weight of judicial authority leans against a finding of special circumstances merely on the basis that the Applicant's final payout figure was considerably less than the deemed economic loss.
5. However, it is open to the Tribunal to factor in the minimal nature of the final payout figure, in conjunction with the other matters outlined above, in determining whether the cumulative effect of all of the factors is sufficient to found a case for special circumstances.

1. The Tribunal considers that special circumstances exist in this matter. Those circumstances are as follows:
   • (a) the Applicant is in straitened financial circumstances;
   • (b) the Applicant is in ill-health;
   • (c) the Applicant has not acted irresponsibly or spent the compensation payment in a profligate manner;
   • (d) application of the full preclusion period will result in the Applicant being deprived of his independence and the stress flowing therefrom would have deleterious implications for his health and longevity;
   • (e) to impose the full preclusion period would be illusory as the evidence discloses that the Applicant will be penniless very soon. A continuation of the current state of affairs will simply result in the Applicant making a further application in the very near future, but by then he will be destitute. In short, the imposition of the preclusion period would be futile and cruel;
   • (f) the Applicant received a net payout considerably less than the deemed economic loss.
2. Having found that special circumstances exist, the next question is why those circumstances justify treating the whole or part of the compensation payment as not having been made.
3. The answer to this question is set out above. It is appropriate to limit the operation of the preclusion period because the Applicant will soon be penniless and the Commonwealth will have to intervene. Prolonging the preclusion period will achieve very little, however it could result in a severe downturn in the Applicant's health and, ironically, result in even greater expenses for the Commonwealth.
4. Finally, there is the question of when the preclusion period should cease. Based on the evidence before the Tribunal it is likely that the Applicant will have expended his remaining capital in the near future. In these circumstances, it would be desirable that the preclusion period conclude on Monday 28 August 2017.

1. The decision under review is set aside and the matter is remitted to the Respondent for reconsideration in accordance with the direction that, for the purpose of calculating the compensation preclusion period, so much of the compensation paid to the Applicant be treated as not having been made such that the lump sum preclusion period concludes on 28 August 2017.

I certify that the preceding 87 (eighty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member J Sosso

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