SOCIAL SECURITY - Receipt of compensation payments - compensation lump sum - Disability Support Pension - JobSeeker Payment - Preclusion Period - s1184K, "special circumstances" discretion - meaning of "special circumstances" - no evidence that special circumstances exist - decision under review affirmed.

Administrative Appeals Tribunal Act 1975 ss 37, 43

Social Security Act 1991 ss 17, 1160, 1169, 1170, 1171, 1184K

Social Security (Administration) Act 1999 s 179

Black and Secretary, Department of Social Security [1994] AATA 291

Davis and Department of Family and Community Services [1999] AATA 84

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114

Director-General of Social Security v Hales [1983] FCA 81; (1983) 78 FLR 373; 47 ALR 281

Dranichnikov v Centrelink [2003] FCAFC 1333

Groth and Secretary Department of Social Security [1995] FCA 1708

Haidar and Secretary, Department of Social Security [1998] AATA 88

Hammelswang and Secretary, Department of Social Services [2015] AATA

Ivovic and Director-General of Social Services [1981] AATA 57

Kulakov and Secretary, Department of Social Security [1991] AATA 668

Lazarov and Secretary, Department of Family and Community Services (2004) AATA 743

Lintern v Secretary, Department of Social Security [1993] AATA 398

Maka and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 374

Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634

Re Krzywak and Secretary to the Department of Social Security (1988) 15 ALD 690

Secretary, Department of Social Security and Bolton [1989] AATA 479

Secretary, Department of Social Security and Bunge (1990) 20 ALD 488

Secretary, Department of Social Security v Smith [1991] FCA 280

Commonwealth, Parliamentary Debates, House of Representatives, 19 June 1995, 1766 (Janice Crosio, Parliamentary Secretary to the Minister for Social Security.

1. The Applicant, Mr Robert Byrne, lodged claims with the Department of Human Services (now Services Australia and referred to in this decision as the Agency) for the Disability Support Pension (DSP) and the JobSeeker Payment (JSP). The Agency rejected Mr Byrne's claims for these social security payments because he was subject to a compensation preclusion period (CPP) from 9 July 2018 to 16 July 2023 (Preclusion Period). The object of a preclusion period is to prevent a person receiving both compensation and social security benefits for the same period of time.[1]

2. An Authorised Review Officer (ARO) found the Agency's refusal decisions were correct. Mr Byrne applied for review by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1). The AAT1 affirmed the Agency's decisions. Mr Byrne subsequently applied to the General Division of the Administrative Appeals Tribunal (Tribunal) for review of the AAT1 decision. The Tribunal has considered all documents filed in this proceeding by the Respondent on 17 August 2021, pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (AAT Act), which included all documentation provided by Mr Byrne in relation to this matter throughout the consideration processes undertaken separately by the Agency, the ARO, the AAT1 and this Tribunal.[2]

3. For the following reasons, the Tribunal has affirmed the AAT1 decision, meaning Mr Byrne's application is unsuccessful and the Preclusion Period continues to apply until 16 July 2023.

4. The issues for determination by the Tribunal are whether:

(a) a compensation preclusion period applies to Mr Byrne, in accordance with the Social Security Act 1991 (Social Security Act), due to his receipt of a 'lump sum compensation payment'; and

(b) if so, it is appropriate in the special circumstances of the case to treat the whole or part of the compensation payment as not having been made to Mr Byrne, so as to reduce the length of the Preclusion Period.

6. On 26 August 2013, Mr Byrne had a compensable event at his then workplace.[3] He retired from work after 28 years with a 'respiratory problem [severe asthma] caused by wood dust'.[4]

7. In April 2017, Mr Byrne received a lump sum compensation payment in the amount of $71,500 from his employer, Corinthian Industries (Australia) Limited.[5] On 6 June 2018, the Agency was notified of this settlement sum and told that further payments were likely to be paid to Mr Byrne.[6]

8. On or around 21 July 2017, Mr Byrne made a claim for 'work injury damages' against his employer.[7]

9. On 21 June 2018, Mr Byrne received a lump sum compensation payment from his employer in the amount of $450,000 (including costs and disbursements), pursuant to a Deed of Release signed on the same day to 'settle all claims and allegations' made against Mr Byrne's employer, including his claim to have 'suffered an aggravation, exacerbation, acceleration and/or deterioration of an underlying lung disease, namely asthma'.[8] While Mr Byrne's employer denied liability, the parties agreed to 'finalise all entitlements that may exist between the Worker and the Employer (not including for hearing loss), including injuries sustained due to the nature and conditions of the Worker's employment'.[9] The compensation payment included a component for lost earnings or lost capacity to earn an income. The Deed of Release also noted that:[10]

If the Worker was, immediately before the date of this Deed, receiving payments of weekly compensation under the Workers Compensation Act 1987, the Employer or its insurer will continue paying weekly compensation...until the date that the net amount of the Settlement Sum is deposited by electronic funds transfer to the Trust Account of the Worker's solicitors.

10. On 25 June 2018, the Agency was informed of the additional lump sum compensation payment to be received by Mr Byrne pursuant to the Deed of Release.[11]

11. On 8 July 2018, Mr Byrne received the lump sum compensation payment in the amount of $450,000 and ceased receiving periodic workers' compensation payments.[12]

12. On 9 July 2018, the Agency was informed by Mr Byrne's former employer's insurer that he had received his last weekly compensation payment on 8 July 2018 and that the lump sum compensation payment of $450,000 had 'settled'.[13] The Agency therefore determined that Mr Byrne was subject to a compensation preclusion period (or CPP) from 9 July 2018 to 16 July 2023 (being the Preclusion Period).[14] As a result, the Agency informed Mr Byrne by letter dated 9 July 2018 that he was not able to receive income support payments during the Preclusion Period ending on 16 July 2023. Mr Byrne has not received any compensation affected payments from the Agency during this Preclusion Period.[15]

13. On 7 September 2018, settlement occurred in relation to real property in regional New South Wales purchased on 5 September 2018 by Mr Byrne (together with another person) for $365,000 (Property).[16] Mr Byrne continues to reside at the Property. Further expenditure by Mr Byrne is referred to below in these reasons.

14. On 27 March 2020, the Agency received a claim for the DSP from Mr Byrne.[17] On 5 April 2020, the Agency rejected Mr Byrne's DSP claim because of the CPP in place until 16 July 2023.[18] On 12 April 2021, an ARO affirmed this decision.[19]

15. On 7 May 2020, the Agency rejected Mr Byrne's claim for JSP due to the CPP.[20] On 7 October 2020, an ARO affirmed this decision.[21]

16. On 12 April 2021, Mr Byrne applied to the AAT1 for review of the ARO decisions refusing his claims for the DSP and JSP.[22]

17. On 1 June 2021, the AAT1 affirmed the decisions under review pursuant to subsection 43(1)(a) of the AAT Act.[23]

18. On 28 June 2021, Mr Byrne lodged an application for review of the AAT1 decision with this Tribunal, which stated that the reasons for seeking a further review were that he was:[24]

claiming for financial hardship as I am receiving only $300 a fortnight from my friend Christine Adolfson for board and lodgings I have been seeing a psychologist for depression and anxiety. And each day it is hard to cope with life. Worried about how I am going to pay my bills with my financial situation.

19. Subsection 17(1) of the Social Security Act defines a 'compensation affected payment' to relevantly mean a DSP or a 'social security benefit', including a JSP.

20. Subsection 17(1) also provides that a 'periodic payments period' relevantly means the period to which 'a periodic compensation payment, or a series of periodic compensation payments, relate'.

21. Subsection 17(2) of the Social Security Act defines 'compensation' to mean:

(b) a payment under a scheme of insurance or compensation under a Commonwealth, state or Territory law, including a payment under a contract entered into under such a scheme; or

(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

22. Under subsection 17(3) of the Social Security Act, the 'compensation part of a lump sum compensation payment' is, relevantly, 50% of the payment 'if the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition' and the claim 'was settled, either by consent judgment...or otherwise'.

23. Part 3.14 of the Social Security Act relates to the effect of compensation payments and their recovery. Section 1160 states that:

(1) This Part operates in certain specified circumstances to do one or more of the following:

(a) reduce a person's compensation affected payment;

(b) render a person's compensation affected payment not payable;

(c) require the repayment of some or all of a person's compensation affected payment;

because of the receipt of compensation by the person or the person's partner.

(2) This Part applies whether or not there is any connection between the circumstances that give rise to the person's qualification for the compensation affected payment and the circumstances that give rise to the receipt of compensation by the person or the person's partner.

24. Section 1169 of the Social Security Act relevantly provides that if a person 'claims a compensation affected payment' and 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'.

25. A 'lump sum preclusion period' is worked out in accordance with section 1170 of the Social Security Act, which states that:

(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:

(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and

(b) ends at the end of the number of weeks worked out under subsections (4) and (5).

(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:

(a) begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and

(b) ends at the end of the number of weeks worked out under subsections (4) and (5).

(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:

(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and

(b) ends at the end of the number of weeks worked out under subsections (4) and (5).

(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:

(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.

26. The 'income cut-out amount' is the amount above which no social security benefit is payable to a person under the ordinary income test. The formula for calculating the income cut-out amount is contained in subsection 17(8) of the Social Security Act as follows:

energy supplement component means the energy supplement worked out under point 1064- C3 for a person who is not a member of a couple: whether or not the person for whom the income cut-out amount is being worked out is a member of a couple; and

(a) whether or not that point applies to the person for whom the income cut-out amount is being worked out.

maximum basic rate means the amount specified in column 3 of item 1 of the table in point 1064-B1.

ordinary free area limit means the amount specified in column 3 of item 1 of the table in point 1064-E4.

pension supplement component means the pension supplement amount worked out under point 1064-BA3 for a person who is not a member of a couple:

(a) whether or not the person for whom the income cut-out amount is being worked out is a member of a couple; and

(b) whether or not that point applies to the person for whom the income cut-out amount is being worked out. [emphasis in original]

27. Section 1171 of the Social Security Act sets out the treatment of two or more lump sum payments and when they are taken to have been received by the person:

(a) a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and

(b) at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;

the following paragraphs have effect for the purposes of this Act and the Administration Act:

(c) the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;

(d) the single payment is taken to have been received by the person:

(i) on the day on which he or she received the last of the multiple payments; or

(ii) if the multiple payments were all received on the same day, on that day.

(2) A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.

28. Subsection 1184K(1) of the Social Security Act provides the Respondent (or, here, the Tribunal) with discretion to disregard some or all of a lump sum compensation payment, stating that:

(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

if the Secretary thinks it is appropriate to do so in the special circumstances of the case.

(a) a person or a person's partner receives or claims a compensation affected payment; and

(c) the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person's or the person's partner's receipt of, or claim for, the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).

29. The Tribunal notes that, although government policy is not binding, it will ordinarily be followed unless there is a cogent reason not to do so.[25] The relevant policy in relation to this matter is contained in the Social Security Guide (Guide)[26] and the Tribunal is not aware of any cogent reason for not following the terms of the Guide.

30. For completeness, the Tribunal notes that, under section 179 of the Social Security (Administration) Act 1999, an application may be made to the Tribunal for review of a decision of the AAT1 made under subsection 43(1) of the AAT Act. As previously mentioned in these reasons, the AAT1 made a decision pursuant to subsection 43(1)(a) of the AAT Act affirming the ARO decisions refusing Mr Byrne's claims for DSP and JSP because of the Preclusion Period. This Tribunal therefore has jurisdiction in relation to Mr Byrne's application for review of the AAT1 decision.

31. For the avoidance of doubt, the Tribunal notes that Mr Byrne did not dispute that a compensation preclusion period applied in relation to his claims for DSP and JSP. However, he contended that the Tribunal should exercise its discretion to treat some or all of the relevant compensation payment as not having been made in the special circumstances of the case. For the following reasons, the Tribunal finds that a compensation preclusion period applies in relation to Mr Byrne.

32. Up until 8 July 2018, Mr Byrne received compensation payments in relation to a workplace injury. These compensation payments were, in part, received as a result of a settlement with Mr Byrne's former employer to finalise all claims and entitlements in relation to a workplace injury. As detailed above in these reasons, Mr Byrne received two lump sum compensation payments from his then employer in the amounts of $71,500 in 2017 and $450,000 in 2018, totalling $521,500. By way of section 1171 of the Social Security Act, Mr Byrne is taken to have received one lump sum compensation payment of an amount equal to the sum of these two lump sum payments. Pursuant to subsection 17(3) of the Social Security Act, the 'compensation part of a lump sum compensation payment' is 50% of the payment. Accordingly, the compensation part of Mr Byrne's lump sum compensation payment is $260,750, being 50% of the sum of the two lump sum payments he received.

33. In accordance with subsection 17(8) of the Social Security Act, the 'income cut-out amount' (or 'divisor amount') at the time the last of the compensation payments was received by Mr Byrne on 8 July 2018 was an amount of $993.60 per week.[27]

34. To work out the number of weeks in the 'lump sum preclusion period' requires application of the formula in subsection 1170(4) of the Social Security Act, being the 'compensation part of a lump sum payment' pursuant to subsection 17(3) (being the amount of $260,750, which is 50% of the total lump sum compensation payment amount of $521,500), divided by the 'income cut-out amount' of $993.60 per week, which provides a 'compensation preclusion period' of 262.42 weeks. Pursuant to subsection 1170(5) of the Social Security Act, this CPP is rounded down to the nearest whole number, being 262 weeks.

35. Under section 1170 of the Social Security Act, the 'lump sum preclusion period' is the period that begins on the day following the last day of the 'periodic payments period'. As stated above in these reasons, Mr Byrne received his last workers' compensation payment on 8 July 2018. Accordingly, the Tribunal finds that the Preclusion Period starts on 9 July 2018 and runs for 262 weeks, ending on 16 July 2023. Therefore, Mr Byrne is subject to the Preclusion Period and cannot receive a compensation affected payment from the Agency in the form of a social security payment up to and including 16 July 2023.

Should the Tribunal exercise the discretion to disregard the compensation payment?

36. As previously stated in these reasons, under section 1184K of the Social Security Act, the Tribunal may disregard the whole or part of Mr Byrne's compensation payment if the Tribunal thinks it is appropriate to do so in the special circumstances of the case. Such a course would remove or reduce the Preclusion Period, currently ending on 16 July 2023, during which relevant social security payments cannot be paid to Mr Byrne.

37. The Federal Court of Australia in Secretary, Department of Social Security v Smith [1991] FCA 280 at [17] observed, in relation to the preclusion period and the associated discretion in the then Social Security Act 1947, that:

The arbitrary nature of the provisions of s.152 would have been quite apparent to the legislature. The "50% rule" in para.152(2)(c)(i), and the other provisions to which I have referred, are intended to operate together 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. As I observed in Banks, at 95 ALR p 613, 12 AAR 46, it is in the very nature of an arbitrary provision that it can entail a degree of unfairness in a particular case. The scheme of Part XVII recognises that perfect matching of eligibilities by dollar amounts or by periods of time for pension and for payments by way of compensation in respect of an incapacity for work is impracticable. At the same time the legislature must have recognised that from time to time a case may arise where the degree of unfairness to a recipient of a payment by way of compensation would bring about as unreasonable and unjust a result which was outside that which could be justified by the practical expediency of the arbitrary nature of the provisions in ss.152 and 153. Section 156 was enacted as part of the scheme under Part XVII before the "50% rule" was introduced by the Social Security Amendment Act 1988 (Cth), but this is no reason to construe s.156 as having no operation in respect of a case where the "50% rule" produces a clearly unjust result. Before the 1988 amendment there were other provisions in Part XVII the strict application of which could operate in an arbitrary way. By its terms the discretion given by s.156 may be exercised where the Secretary (or a body standing in the place of the Secretary on appeal) "considers it appropriate to do so in the special circumstances of the case". These are wide words intended, as the Tribunal in Ivovic (supra) pointed out, "to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case".

38. While the phrase 'special circumstances' is not defined in the Social Security Act, it has been considered by the Tribunal and the Federal Court. In Dranichnikov v Centrelink [2003] FCAFC 1333 at [66], the Full Federal Court said that '[t]here will be a requirement that the circumstances are such that take the case out of the ordinary'. In Groth and Secretary Department of Social Security [1995] FCA 1708 at [12], Justice Kiefel (as she then was) stated that special circumstances:

would require something to distinguish Mr Groth's 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.

39. Additionally, in Ivovic and Director-General of Social Services [1981] AATA 57 at [45], it was relevantly said by the Tribunal that:

there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part...the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the Social Services Act 1947: cf. Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492 at 505 per Dixon J...he must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate.

40. In the Second Reading speech on 19 June 1995 for the Social Security Legislation Amendment Bill (No 1) 1995, it was noted that:[28]

The compensation recovery provisions of the act protect the social security system from 'double dippers' - that is, those who might receive social security payments, as well as compensation, for the same period...the provisions will apply to claimants as well as recipients of certain social security payments. This will free claimants as well as the department of the need to go through a time consuming and often costly qualification assessment exercise when the compensation recovery provisions might well already preclude payment.

41. In addition, the Guide at Instruction 4.13.4.10 states that:

The compensation recovery provisions of social security law are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.

Note: The special circumstances provisions should not be used to override this basic legislative intention.

The special circumstances provisions should ONLY be applied in unusual, unforeseen or exceptional circumstances.

This means in situations where the compensation provisions could lead, or have led to extreme hardship or created an inequitable, unjust or unreasonable situation.

42. In Lintern v Secretary, Department of Social Security [1993] AATA 398 at [11], the Tribunal noted that 'it is a fundamental principle that public money be used to support social security benefits, not to improve or give gain to its recipients'. To that end, the proper expenditure of public funds must be considered. This was referred to in Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at [80], where the Tribunal stated that whether it was desirable to waive a debt on the basis of special circumstances 'necessarily requires a consideration of the person's individual circumstances but also a consideration of the general administration of the social security system'. The Tribunal considers the general administration of the social security system to be a relevant consideration in determining whether it is appropriate to treat the whole or part of a compensation payment as not having been made due to the special circumstances of the case under section 1184K of the Social Security Act. In this regard, and having considered the abovementioned authorities, the purpose of the discretion in section 1184K of the Social Security Act is not to provide subsequent relief or a windfall to people who have already been compensated.

43. Mr Byrne contended there were various factors amounting to special circumstances, such that the compensation payment should be disregarded in whole or in part, comprising: his expenditure of the compensation payment; ill health; medical expenses; inability to work and financial hardship. The Tribunal considers those factors below in these reasons.

44. Mr Byrne contended that he now requires income support payments because he has expended all of the two lump sum compensation amounts he received as a result of the settlement with his former employer, totalling $521,500. As previously set out in these reasons, in 2017, Mr Byrne received a lump sum payment in the amount of $71,500 and, in 2018, Mr Byrne received the second of his two lump sum payments in the amount of $450,000. Additionally, in July 2018, Mr Byrne received the last of his periodic workers' compensation payments. Since that time, Mr Byrne has purchased the following items totalling $460,606:

(a) a spa in the amount of $7,800 on 28 July 2018;[29]

(b) Mr Byrne's Property in the amount of $365,000 on 5 September 2018;[30]

(c) doors for the Property in the amount of $3,650 on 18 September 2018;[31]

(d) Toyota Hilux motor vehicle in the amount of $62,758 on 14 June 2019;[32]

(e) sheds for the Property in the amount of $13,000 on 14 June 2019;[33]

(f) electrical appliances in the amount of $2,398 on 8 November 2019;[34]

(g) ride-on lawn mower in the amount of $3,000 on an unidentified date;[35] and

(h) furniture and general bills in the amount of $3,000 on unspecified dates.[36]

45. In his application to this Tribunal, Mr Byrne stated that his solicitors' fees in relation to the second lump sum compensation payment were $56,000, however there was no other evidence regarding the payment of these costs.[37] Despite this, adding these legal costs results in a total expenditure of $516,606, which is almost the sum of the two lump sum compensation payments in the amount of $521,500. Additionally, there was no evidence of how Mr Byrne spent $200,000 of his superannuation which was released in August 2018, although he acknowledged that this amount was 'put into my bank account' and he told the AAT1 that these funds had also been expended.[38] In a note to the Agency on 9 July 2020, Mr Byrne said he was 'applying for the pension' because 'I have no income as I had purchased a home [the Property] and other essentials...I needed to feel secure for my wellbeing as I never had my own place to live especially with my health condition not improving and the ongoing medications that I need to continue'.[39] In addition, in an undated note to the Agency, Mr Byrne listed items under the hearing 'Total Spent', said to be $654,000, which included 'Release of Super' in the amount of $200,000.[40]

46. Mr Byrne purchased the Property with Mr Peter James Adolfson as tenants-in-common.[41] However, Mr Byrne's evidence was that the purchase of the Property was funded wholly by himself. Mr Adolfson is the son of Mr Byrne's friend, Ms Christine Adolfson, who was his representative at the Tribunal hearing and is also his lodger at the Property. Mr Byrne told the AAT1 that Mr Adolfson was included on the Certificate of Title for the Property so that Mr Byrne's sister cannot inherit anything from him.[42] Mr Byrne also stated that he is unable to ask the joint owner, Mr Adolfson, to provide any financial support because he could not afford it.[43] There was no documentary evidence in relation to this arrangement or Mr Adolfson's capacity to provide financial support, although Ms Adolfson told the Tribunal that her son 'does help a lot with the rates', but he is on a 'part-pension' and earns $12 an hour. Furthermore, the Property is unencumbered; there is no mortgage over the Property and Mr Byrne told both the AAT1 and this Tribunal that his father had always recommended he use any substantial money he received towards the purchase of real property. The AAT1 also noted that Mr Byrne had said that 'his father had always recommended he purchase a house and try to avoid a mortgage, and he was keen to do that'.[44] It is noteworthy and commendable that Mr Byrne followed this advice and applied the bulk of the compensation payment to a substantial asset for his financial and emotional security. Importantly, however, the Guide at 4.13.4.20 states that where a person 'uses compensation proceeds to purchase a house or pay off the balance of a home loan, special circumstances would generally not be found'.[45]

47. Furthermore, it was unclear to the Tribunal why Mr Byrne purchased a new motor vehicle in excess of $60,000 in circumstances where he had been informed that the compensation payment was intended to sustain him until the end of the Preclusion Period in July 2023. In this regard, in a letter dated 24 June 2021 enclosed with his application to this Tribunal, Mr Byrne stated that after he received the compensation payment and superannuation funds: 'I was told by my solicitor if you want help there is a preclusion period to 2023'.[46]

48. In addition to the abovementioned expenditure, Mr Byrne's bank account statements that were before the Tribunal from between January 2020 and February 2021 list significant unexplained cash withdrawals.[47] For example, there were 35 cash withdrawals in the two months from 7 January to 26 February 2020, totalling $7,757.80.[48] These cash withdrawals appear to be in addition to transactions detailing purchases for essential items such as groceries and medications as well as other identifiable recreational expenses. The Tribunal finds that a significant amount of Mr Byrne's additional expenditure has not been satisfactorily explained, which weighs against making a finding of special circumstances: Lazarov and Secretary, Department of Family and Community Services (2004) AATA 743.

49. Mr Byrne gave evidence to the AAT1 that he did not seek any financial advice in relation to the compensation payment and did not intend to do so.[49] However, Mr Byrne also told the AAT1 he was advised by his legal representative about his financial options when he received the lump sum compensation payment and that he would not be able to claim income support for a period of five years.[50] In this regard, while the purchase of the Property (and related expenses) was understandable, the Tribunal finds that Mr Byrne did not take meaningful steps to manage his financial affairs effectively to ensure that he used all of the compensation payments to support himself during the entirety of the Preclusion Period. Moreover, as previously stated, the Guide provides that special circumstances would generally not apply where a person uses compensation proceeds to purchase a house. Accordingly, for all the reasons set out above, Mr Byrne's expenditure of the compensation payment weighs against the Tribunal exercising the discretion to treat the whole or part of that compensation payment as not having been made.

Health, medical expenses and inability to work

50. Mr Byrne contended that he is unable to work due to his medical condition and relied on a letter from Dr David Bryant, Professor of Medicine, dated 1 July 2020 which stated that:[51]

I first saw him in 2016 when he was diagnosed with severe asthma as a consequence of damage done to the lungs from exposure to and sensitisation to the wood dust that he was inhaling in the course of his work at that time. He had spirometric evidence of severe airflow limitation (FEV1 47% pf predicted) at that time.

Over the intervening years there has been no improvement in his asthma despite him having had no exposure to wood dust since 2013. He remains breathless on minor exertion and his lung function has not improved despite ongoing treatment...

Although there may be a modest improvement in his effort tolerance and his sense of well being if he achieves further weight loss, this is unlikely to affect his asthma and his airflow limitation and it is therefore my opinion that his current level of respiratory disability is independent of his weight and that his impairment is...permanent and precludes him from further work.

51. The Guide at Instruction 4.13.4.20 provides the following 'General Principles' to be considered in relation to a person's health when considering whether special circumstances apply: the state of ill health should be 'more severe than the majority of DSP recipients'; and injury that a person received compensation for 'cannot generally be regarded as a special circumstance'.[52] In this regard, the Tribunal finds that it is not unusual or out of the ordinary for someone who has received compensation as a result of a compensable injury and the associated loss of income to continue to suffer the effect of that condition and to be unable to work. As previously stated in these reasons, Mr Byrne received the compensation payment due to a workplace injury. The evidence before the Tribunal is that his ill health largely relates to that compensable injury. As a result, pursuant to the Guide, the Tribunal finds that the injury for which Mr Byrne received compensation cannot be regarded as a special circumstance to enliven the exercise of the discretion to disregard some or all of the compensation payment for the purpose of reducing the Preclusion Period.

52. To this end, in Hammelswang and Secretary, Department of Social Services [2015] AATA 905 at [4] and [7]-[8], the Tribunal stated that:

A number of matters are said by Mr Hammelswang and his mother, who has assisted him, to demonstrate that the case is special. It may be accepted that he has a very significant injury to his back that causes him considerable pain and requires that he take a frightening array of medication. It may be accepted, as well, that the medications that he has taken, and continues to take, affect his cognitive ability or, as he put it, he has difficulty remembering things and he has difficulty articulating...

Whilst I accept that Mr Hammelswang has a considerable injury and is in considerable pain that, it seems to me, is, in and of itself, not unusual. Most who qualify for disability support pension do so because of the presence of one or more impairments that prevent them from pursuing employment. That presupposes a level of disability common in persons who would qualify for disability support pension. The financial position in which Mr Hammelswang finds himself is undoubtedly strained; however, it does not seem to me to be out of the ordinary for someone in his circumstances...

I am not satisfied that his circumstances are out of the ordinary or answer the description of special circumstances, as it is used, in s 1184K. I decline to exercise the discretion favourably to Mr Hammelswang.

53. In addition, in Secretary, Department of Social Security and Bolton [1989] AATA 479 (Bolton), the Tribunal concluded that a person having health problems would not of itself constitute special circumstances. It relevantly found at [25] that:

If it were simply a matter of feeling sympathy for a battling working man who has had more than his share of trouble I would have no difficulty in finding for the respondent in this case. But given in particular the extent of his assets, especially the Livingstone property, I cannot do so. No special circumstances exist here to justify exercising the discretion given by s.156 of the Act. The topic of special circumstances has been thoroughly analysed in the decisions of the Tribunal and of the Federal Court discussed above, and consistently with the principles therein set out I am unable to give paramountcy, as did the SSAT, to the decline in the respondent's health. My decision must be to set aside the decision of the SSAT dated 12 December 1988, and in substitution therefor to decide that the invalid pension to which the respondent is otherwise entitled is not payable until 20 January 1992, being the termination of the preclusion period arising in terms of s.153 of the Act by virtue of the lump sum payment received by him.

54. In Kulakov and Secretary, Department of Social Security [1991] AATA 668 at [21], the Tribunal noted that the applicant was qualified to receive a social security payment were it not for the applicable preclusion period, however found, citing Bolton, that 'ill health alone cannot be held to be a special circumstance'. Furthermore, in Black and Secretary, Department of Social Security [1994] AATA 291, the applicant's ill health and his incapacity to work were not regarded as special circumstances since the lump sum compensation that he received was intended to provide for his restricted ability to work. Additionally, in Secretary, Department of Social Security and Bunge (1990) 20 ALD 488, the Tribunal held that:

we find that there are no 'special circumstances' in the relevant sense. What is 'special' about the circumstances of Mr Bunge is that he is suffering and will suffer permanently from a disability. That is the circumstance which makes him eligible for an Invalid Pension. It is not a circumstance so 'special' as to confer on him entitlements greater than others similarly qualified by such disabilities. The second consideration which creates difficulties for him in the short-term is that he has applied the bulk of the compensation monies in the purchase of a home and car to provide long-term benefits for his handicapped wife, his son and himself. That was a prudent act which has no doubt created short-term difficulties and, which hopefully, will confer long-term benefits, but does not give rise to any 'special circumstances' such as would warrant exceptional treatment for the respondent.

55. Accordingly, where a person's health would make them eligible to receive a relevant social security payment, this would not of itself constitute special circumstances within the context of the Social Security Act. To this end, the Tribunal is not satisfied that Mr Byrne's inability to work due to his health constitutes 'special circumstances' as contemplated in relation to the discretion to disregard compensation payments. Furthermore, Mr Byrne's medical condition and its continuing effect was the reason he received a substantial compensation settlement from his former employer. While Mr Byrne's medical expenses for his physical and mental health conditions may be high, they appear to be related to the injury for which he was compensated or to Mr Byrne's financial situation following the dissipation of his compensation payment.[53] That Mr Byrne requires treatment for these conditions which prevent him from working is not unusual or extraordinary. In this regard, in Maka and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 374 at [17]- [18], the Tribunal relevantly found that:

Mr Maka is in a better position than many people who have been injured and compensated and many people who receive social security payments. He has the benefit of having paid out his mortgage on his, now unencumbered, property...

Mr Maka's medical conditions, for which he has been compensated, do not amount to special circumstances. The continuing effects of injuries are unfortunately not an unusual consequence. That he has experienced difficulty in obtaining further work on account of his injuries is neither unusual nor extraordinary. It is not unusual for a person who has been compensated for injuries to remain unable to work.

56. In relation to Mr Byrne's mental health condition, a succinct medical certificate by Dr Mariane Austria dated 14 January 2021 stated that Mr Byrne is receiving medical treatment and 'had been depressed due to financial problems'.[54] A letter by Ms Peta O'Meley, Psychologist, dated 29 March 2021 stated that Mr Byrne has been referred to her for 'psychological management of depression and low mood'.[55] In addition, a letter dated 10 February 2021 from Dr Tony Brancatisano, Senior Bariatric Medical Practitioner at the Sydney Bariatric Clinic, stated that Mr Byrne 'has been undertaking medical weight management since June 2019' when his weight 'was 130kg with a BMI of 45 which places him in the morbidly obese range'.[56] Mr Byrne has been undertaking weight management and lost 10kg 'which is a great effort considering his mental health issues, but has had some weight regain due to comming [sic] off contrave prematurely'.

57. While Mr Byrne appears to have some medical conditions, such as his mental health condition, sleep apnoea and weight, for which he did not receive compensation by way of the compensation payment, he did not provide any further evidence in support of his expenditure for those separate medical conditions. Based on the available evidence, the Tribunal is not satisfied that Mr Byrne's state of health is unusual or out of the ordinary in comparison to other income support recipients or that it is more severe than the majority of DSP recipients of similar age, such that the discretion to treat the whole or part of the compensation payment as not having been made should be exercised in his favour.

58. As stated above in these reasons, Mr Byrne applied to this Tribunal because he was:[57]

claiming for financial hardship as I am receiving only $300 a fortnight from my friend Christine Adolfson for board and lodgings I have been seeing a psychologist for depression and anxiety. And each day it is hard to cope with life. Worried about how I am going to pay my bills with my financial situation.

59. In addition, there was evidence before the Tribunal in the form of bank account statements that, as at 17 February 2021, Mr Byrne had a total of $6.81 in three bank accounts.[58]

60. In order for financial hardship to be a relevant factor in the consideration of whether to exercise the discretion in section 1184K of the Social Security Act, a person's financial situation must be exceptional, rather than merely straitened. In addition, financial hardship of itself does not amount to a 'special circumstance'. As relevantly set out in Bolton at [24]:

This factor alone is not sufficient, and if hardship exists it must be "exceptional": Re Colaiacolo and Secretary to the Department of Social Security, Decision No.2109, 24 April 1985. In Re Hajar at paragraph 43 Mr McMahon said:

"Financial hardship has been considered as a possible component of special circumstances in a number of decisions. It is clear, however, that standing by itself, it would not amount to a 'special circumstance' (Re Beadle, 6 ALD 1 at 4). Furthermore the financial circumstances must be more than straitened. They must be 'exceptional' (Re Colaiacolo, Decision No.2109, 24 April 1985 at paragraph 19)".

Later at paragraph 45 he says: "... I find it impossible to ignore the existence of the house ...". He went on to refer to how the asset could be liquidated by a property settlement or a sale and concludes: "It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it ...". In that case the applicant had received at settlement an amount of $55,000 in November 1987 and was precluded from receipt of unemployment benefit until 20 December 1989, although this period was later reduced to 20 June 1989. He had applied for unemployment benefit on the same day as the payout.

An example of such "exceptional" financial hardship is in Re Krzywak, where the applicant had no income or savings at all and was forced to obtain food vouchers or borrow from friends in order to buy food. Her award was all used up repaying debts incurred prior to her injury and which she reasonably thought she could repay, and she had no other source of income.

61. Moreover, in Director-General of Social Security v Hales [1983] FCA 81; (1983) 78 FLR 373; 47 ALR 281, the Full Federal Court stated that:

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.

62. Furthermore, as the Tribunal stated in Re Krzywak and Secretary to the Department of Social Security (1988) 15 ALD 690 at [39], 'the circumstances out of which hardship arose and the degree of hardship, are both relevant in deciding whether and how the discretion...should be exercised'.

63. In a letter to the Agency dated 8 March 2021, Mr Byrne wrote:[59]

I am struggling to survive on $300 per fortnight for the 6-8 months which I am receiving from board and lodging from a friend.

Please be informed that I am on a lot of medications for my severe asthma as a consequence of damaged lungs from the exposure of wood dust that I was inhaling at my job of 28 years...I have also been diagnosed with depression and anxiety with the pressure and stress of living on such a low income.

64. While this letter provides some detail about Mr Byrne's current financial circumstances, there was no evidence before the Tribunal indicating that Mr Byrne's ill health affected his capacity to make rational decisions in expending the compensation payment. When Mr Byrne was asked at the AAT1 hearing whether he had 'given any earlier thought to how he would maintain himself if he did not have any funds left', Mr Byrne stated that 'he did not do so but now finds himself in a financially difficult situation'.[60] As previously mentioned in these reasons, Mr Byrne also told the AAT1 that he had not sought any financial advice and had no intention to do so.

65. The Guide at Instruction 4.13.4.20 provides that a person's financial circumstances 'need to be severe and worse than the majority of social security recipients' and that the value of all cash and realisable assets should be taken into account.[61] Again, most relevantly, the Guide states that, where a person use compensation proceeds to purchase a house, special circumstances would generally not be found. The Guide also notes that decision-makers should look at whether the person has 'realisable asset/s that could be used to solve their current dilemma, i.e. to maintain them for the remainder of the preclusion period'.[62]

66. Furthermore, the Guide states that a person must show that there are 'truly compelling reasons' why they should not realise their assets.[63] Mr Byrne's realisable assets include the Property (purchased in 2018 for $365,000) and the motor vehicle (purchased in 2019 for $62,758), both of which he purchased after receiving the compensation payment. While Mr Byrne told the Tribunal that his late father had told him to use any substantial money he acquired in life to purchase property, and he is understandably loath to realise that asset, Mr Byrne has not otherwise explained why he cannot sell the Property or his motor vehicle and use the sale proceeds to support his living and rental costs until the end of the Preclusion Period in July 2023.[64] It is likely these unencumbered assets place Mr Byrne in a better position than the majority of recipients of income support payments. To this end, the Tribunal is not satisfied that Mr Byrne's financial circumstances are 'severe' and 'worse than the majority of social security recipients', as required by the Guide. The Property was purchased by Mr Byrne for $365,000 and is unencumbered. While Mr Byrne in a Statement of Financial Circumstances dated 26 May 2021 estimated that the current value of the Property remained the same as the purchase price from three years ago,[65] it is likely the value of the Property is now higher. Alternately, it would be open to Mr Byrne to charge a higher lodging fee or rent out another bedroom in the three bedroom house in order to receive some additional income during the Preclusion Period. In this regard, as noted in Bolton, the Tribunal in this case finds it impossible to ignore the existence of the Property in determining whether special circumstances apply. While the Tribunal understands Mr Byrne's significant reticence to realise the Property and other assets after acquiring them following settlement of his compensation claims, the Guide directs that these realisable assets should be taken into account and whether they could be utilised to alleviate a person's current financial situation.

67. Based on the evidence in relation to Mr Byrne's financial circumstances, and the Guide's direction in relation to realisable assets such as real property, the Tribunal is not satisfied that Mr Byrne's financial hardship is 'exceptional', 'severe' or 'worse than the majority of social security recipients'. Accordingly, the Tribunal finds that there are no special circumstances and it would not be appropriate to treat the whole or part of the compensation payment as not having been made in relation to Mr Byrne's case.

68. The Guide notes that the special circumstances provisions in the Social Security Act should only be applied in 'unusual, unforeseen or exceptional circumstances'. The numerous court and Tribunal cases cited in these reasons support a finding that no special circumstances exist in relation to Mr Byrne. On the evidence before the Tribunal, it is satisfied that no such circumstances exist to justify the exercise of the discretion to treat the whole or part of the compensation payment as not having been made to Mr Byrne. Therefore, the Tribunal will affirm the decision under review, which means that Mr Byrne's application is unsuccessful and the Preclusion Period remains in place until 16 July 2023.

69. Taking into account the totality of the circumstances described above, while the Tribunal acknowledges that Mr Byrne's current situation is difficult for a number of reasons, the Tribunal has found that his circumstances are not 'special' as contemplated by the Parliament, so as to justify the exercise of the discretion in section 1184K of the Social Security Act.

70. The Tribunal affirms the decision under review pursuant to subsection 43(1)(a) of the AAT Act.

I certify that the preceding 70 (seventy) paragraphs are a true copy of the reasons for the decision herein of Member W Frost.

[1] Haidar and Secretary, Department of Social Security [1998] AATA 88 at [4].

[12] Exhibit 1, T27, page 175; T38, page 221; T39, page 231.

[14] Exhibit 1, T9, pages 70-72; T38, page 221.

[18] Exhibit 1, T19, pages 158-159; T20, pages 160-161.

[25] Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634.

[28] Commonwealth, Parliamentary Debates, House of Representatives, 19 June 1995, 1766 (Janice Crosio, Parliamentary Secretary to the Minister for Social Security).

[30] Exhibit 1, T11, pages 74-75; T13, pages 79-80.

[33] Exhibit 1, T27, page 178; T36, page 199.

[35] Exhibit 1, T27, page 178; T36, page 199.

[38] Exhibit 1, T1, page 4; T2, page 11; T35, page 193; T36, page 199.

[47] Exhibit 1, T18, pages 145-157; T21, pages 162-165; T33, pages 184-187.

[64] See Davis and Department of Family and Community Services [1999] AATA 84 (Davis).