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

.....................[sgd].........................

CATCHWORDS - SOCIAL SECURITY - compensation preclusion period - special circumstances - hardship

Social Security Act 1991

1. Sosefo Maka was injured in the workplace in February 1993. One of his enduring disabilities is a severe impairment of speech - dysarthria.

In December 2002, Mr Maka received a lump sum compensation settlement of $289,793.12 and, in March 2007, he received a further lump sum compensation payment of $150,000.00. Mr Maka was paid periodic compensation up to and including 11 April 2007. 2. As a result of these payments, the Secretary imposed a compensation preclusion period from 12 April 2007 until 13 March 2013. Mr Maka appeals the decision of the Secretary. 3. The issues for me to consider are therefore whether the compensation preclusion period prescribed by section 1170 of the Social Security Act 1991 has been correctly calculated and whether there are any special circumstances of the kind that warrant exercise of the discretion in section 1184K of the Act.

WAS THE COMPENSATION PRECLUSION PERIOD CORRECTLY CALCULATED?

1. Section 1169 of the Act precludes, for a period, the payment of compensation affected payments when a lump sum compensation payment has been received. This is called a lump sum preclusion period.
2. Sections 17(3) and 1170 of the Act prescribe a formula for the calculation of the period for which a social security payment may not be paid to the recipient of a lump sum compensation payment. The formula operates by dividing 50% of the compensation lump sum, in this case 50% of the combined total of $289,793.12 and $150,000, by the income cut-out amount, that is, the maximum amount a person may earn before a social security payment is no longer payable. In March 2007, the relevant income cut-out amount was $711.38 per week. The resulting figure is 309.11 or 309 weeks for which Mr Maka may not be paid a social security payment, commencing on 12 April 2007, being the day after the final date for which he was paid periodic compensation. This period ends on 13 March 2013.
3. The Secretary's calculation of the period was correct.

1. Section 1184K of the Act provides for a discretion to shorten a preclusion period by disregarding all or part of the compensation lump sum if appropriate in the special circumstances of a case. Special circumstances are circumstances that are unusual or extraordinary.
2. As a result of the dysarthria, Mr Maka had difficulty communicating with the Tribunal. Mr Maka's younger sister, Moira, was present at the hearing and at times assisted Mr Maka in his communication. She also gave her own evidence. A combination of the evidence given by both Mr Maka and his sister has provided the following picture of Mr Maka's circumstances.
3. After legal costs, Mr Maka exhausted his settlement monies through the following expenditures:
   • (a) Approximately $60,000 on renovations to his house;
   • (b) The purchase of a second-hand car;
   • (c) A $11,000 donation to his church in Tonga;
   • (d) Between $60,000 to $80,000 on a divorce settlement;
   • (e) Money to his two daughters;
   • (f) Travel to the United States to attend a funeral;
   • (g) Discharge of his mortgage on his property at Auburn;
   • (h) Approximately $140,000 payment on the mortgage over his sister's property at Rooty Hill.
4. Mr Maka contends that he no longer has any money and requires financial assistance from his sister. Mr Maka said that on occasions he gambled but only when he had money and it would be to the tune of $50 to $100 or "whatever he could spare". He said that he no longer gambles as he has no money.
5. Mr Maka currently lives in his home in Auburn. Ms Maka said that at the time of her brother's compensation settlement, Mr Maka was in default of his mortgage and was required to pay monies from his settlement to correct the default. The property is no longer encumbered. Ms Maka also resides in this house along with her husband and rents out her property at Rooty Hill.
6. Despite Mr Maka's contrary contention that the monies he applied to the mortgage over the property at Rooty Hill were a gift to his sister, it is clear that Ms Maka considers that her brother is entitled to half of the value of the property in the event that it is sold. She also considers that Mr Maka is entitled to a share in the rental income from the property, which she has given to him on a regular basis. Currently, the rental income from the property is $330 per week from which expenses are paid. Ms Maka said that the net income is currently being applied to cover the mortgage repayments for a second property that she has purchased but, nevertheless, she gives Mr Maka between $100 to $200 per week in addition to paying for all household expenses.
7. Mr Maka's current expenses include the cost of train tickets; petrol for his car; medication costs (I note that Mr Maka has recently received a Low Income Health Care Card to assist him with these expenses); the occasional electricity bill or water or council rates which he pays when he has funds available; and money that he gives to his two daughters who are 24 and 26 respectively and reside with their mother. He volunteers at Mary MacKillop Place once a week and occasionally buys flowers to give to the staff there. Food and other household items are paid for by

Ms Maka. 8. On a few occasions, Mr Maka has found casual security work but says that it has been difficult to find work since, given his physical condition. 9. I also note that Mr Maka has travelled outside Australia on no less than eight occasions since the settlement of his compensation claim. Ms Maka said that this travel was to attend family occasions such as funerals and she paid for the cost of some of these airfares herself. 10. The aim of the legislation is to avoid the double payment of people who have been compensated for injuries. (See Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541). A person in receipt of a compensation lump sum will have ongoing medication and living expenses. Payment of those expenses is the purpose of the lump sum. It is unclear as to how Mr Maka intended to pay for his ongoing living expenses when he spent his settlement monies. However, I note that Centrelink made it clear in letters to Mr Maka's solicitor dated 26 August 2002 and 4 April 2003 that he would not receive social security payments until March 2013. 11. 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 at Auburn and also has the benefit of having contributed to the mortgage on his sister's property at Rooty Hill through a share of the rental income. It is neither unusual nor extraordinary that Mr Maka was required to pay out a debt that arose as a result of defaulting on his mortgage or to make payments in accordance with his divorce settlement. He was able to retain his property and able to contribute to reducing the mortgage on his sister's property and reap the consequent benefits. 12. 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. 13. Mr Maka's circumstances are not special within the meaning of section 1184K of the Act.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Senior Member

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

Solicitor for the Respondent Ms Glenda Heggen, Centrelink Legal Services