Social Security Act 1991, s. 1184

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Re Ivovic and Director-General of Social Services [1981] AATA 57; (1981) 3 ALN N95

Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464

Re Venables and Secretary, Department of Social Security (1988) 15 ALD 180

Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716

Solicitors for the Applicant: Peter Mcdougall, Department Of

Veterans' Affairs

Counsel for the Respondent: Ms C. Ronalds

Solicitors for the Respondent:Carolyn Huntsman, Legal Aid Commission

The Tribunal affirms the decision of the Social Security Appeals Tribunal of 12 February 1993.

M.T. LEWIS, J.D. CAMPBELL AND I.R. WAY This is a review of a decision of the Social Security Appeals Tribunal dated 12 February 1993 which set aside a decision of a Delegate of the Secretary of the Department of Social Security ("the Applicant") rejecting a claim for disability support pension made by George Galea ("the Respondent") on the basis that the Respondent was precluded from receiving pension between 13 May 1992 and 19 September 1995 due to his receipt of a lump sum compensation payment. The preclusion period had been calculated by the Applicant applying the relevant provisions of Part 3.14 of the Social Security Act 1991 ("the Act"). An application for review of the Social Security Appeals Tribunal decision was lodged by the Applicant with this Tribunal on 15 March 1993.

2. At the hearing, the Tribunal had before it the documents provided pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, a statement of the Respondent, with addenda, dated 17 September 1993 (exhibit 1) and a copy of a health care card issued on 7 November 1991 in the name of Ms Brenda M Ellis (exhibit 2). The Tribunal also heard oral evidence from the Respondent.

3. The undisputed facts in this case are that the Respondent suffered a serious back injury as a result of two work accidents in December 1985 and about April 1986 while he was working as a truck driver. The section 37 documents show that there were various periods after the accidents during which he received weekly workers' compensation payments and sickness benefits from the Department of Social Security. His compensation claim was finally settled for $300,000 before any deductions. This fact was notified to the Department of Social Security, which then applied section 1165 of the Social Security Act 1991.

4. In summary, this provision (and other associated sections) provides that when a person receives a lump sum compensation award, a formula is applied to the compensation part of the lump sum to arrive at a period of preclusion during which time the person who received the lump sum and his partner cannot receive any of the affected social security payments specified in the Act.

5. There is no disagreement between the parties in this application that the "preclusion period" was correctly calculated by the Applicant. It was calculated that the Respondent was precluded from receiving any of the affected social security payments between 13 May 1992 and 19 September 1995, a period of 175 weeks.

6. The Respondent applied for a disability support pension on 7 September 1992 (T4). He lodged a number of accompanying documents with his claim, including details of his compensation settlement (T23) and medical details in relation to his claim (T26) which was based on chronic low back pain. A delegate decided that the Respondent was qualified for the pension on medical grounds (T31) but his claim was refused on the basis of the preclusion period arising out of the award of compensation. Disability support pension is one of the affected payments under the Act.

7. The only issue to be determined by this Tribunal is whether there are "special circumstances" in this case so as to justify an exercise of the discretion contained in section 1184 of the Act to disregard all or part of the compensation payment made. Section 1184 reads -

" 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."

8. The Respondent's oral and written evidence to the Tribunal was that he is 33 years of age and lives in Blacktown with his de facto wife, Brenda Ellis, and their six children. The children range in age from 13 years to 7 months, with only three children being of school age. Ms Ellis had three children from a prior relationship and the Respondent and Ms Ellis have three children together.

9. The Respondent attended school until Year 9 and left school in 1975 at the age of 15. He has had a number of jobs since leaving school, including work in the building trade, a labourer, a truck driver and he undertook a motor mechanic apprenticeship when he was younger which he did not complete.

10. The Respondent gave evidence of his long history of heroin use. He first commenced using heroin when he was 15 and in his statement (at para 20) states that the practice had developed into a serious habit by the time he was about 19. In 1979 he received a lengthy jail sentence for armed robbery, an offence which was related to his drug use. He spent about 18 months in custody but soon after his release from prison in December 1980 he began using heroin again.

11. The Respondent described periods when he was using heroin and periods when he attempted rehabilitation. He has had a total of 23 admissions to various clinics over the years in his attempts to give up his heroin habit. He had a number of admissions to the residential drug rehabilitation course at "We Help Ourselves" (or "WHOS"), the most successful period being a 20 month stay during 1983-1984. In this time, the Respondent took on extra responsibilities, becoming the detoxification coordinator responsible for dispensing medication and supporting and counselling other residents.

12. After leaving WHOS in 1985, the Respondent said that he was feeling very sure of himself (statement, para 25). He had a number of jobs and, after about a year in the workforce, was feeling good about himself ". . . enjoying being a productive member of society." (statement, para 14). On 20 December 1985, while working at Page's Hire Centre, the Respondent suffered a back injury while he was lifting a table. He took some time off and had returned to work for two months when he injured his back again. The Respondent said that he had not worked since that second accident at Easter 1986.

13. The Respondent was left with a chronic back condition and the pain he experienced in the period following the accidents caused him to be hospitalised on many occasions. He was often prescribed strong pain killers such as pethidine. In 1989, he underwent an operation on his back and after his discharge from hospital he started using heroin again. He describes this period up to July 1990 as a "blurred time" (statement, para 19). He was unable to work, he was wearing a back brace and the back pain was causing him some distress. From July 1990 he decided to try to avoid using strong pain killers for fear of slipping back into his addictive behaviour.

14. At about the time he was in hospital in early 1989, the weekly workers' compensation payments he had been receiving were stopped and he commenced receiving sickness benefits from the Department of Social Security from March 1989. When the Respondent claimed sickness benefits, he advised the Department of Social Security that he had a compensation claim (see T6, p 16) and the Department sent him a letter dated 16 April 1989 (T9, p 89) giving general advice about the possible effects of compensation payments on social security entitlements. In his evidence the Respondent said he received the letter at his Rosebery address -

". . . but at that time it meant nothing to me, because this was

at a time when I claimed for sickness benefits. Like my settlement

was still three years off, and I didn't know it was three years off.

As far as the time when I did settle, my recalling this letter just

wasn't there. There was nothing in my head that said to me don't

forget that letter you got three years ago that says you have to

contact social security in seven days; because when I read this

letter, after initiating the Social Security Appeals Tribunal - the

hearing there - when I read this that's when I sort of went oh - you

know - because I didn't - I remembered the letter, but I didn't

remember its contents". (transcript p 17).

15. On 24 April 1990, the Compensation Court reinstated the Respondent's weekly compensation payments and ordered arrears to be paid (see order T13, p 26). As a result, a charge of $8,062.80 was raised against the Respondent for sickness benefits received during the period covered by the arrears (T15).

16. The Respondent described difficulties in his relationship with his girlfriend in about 1986 and 1987. She would call him "a bludger and a no good." (statement, para 28). As a result, his self esteem was very low. He stated that this 10 year relationship broke down around the end of 1990 because of a combination of his pain, the accompanying distress and his low self esteem which he partly attributed to being incapacitated for work. During the period 1987 to 1989, the Respondent described periods of "bingeing" on heroin for a week or two followed by periods of not using the drug. During the first half of 1990, the Respondent said that he used heroin both as a drug of choice and as an effective pain killer, but from about July 1990 he decided to stop using heroin.

17. Some time after the breakdown of his relationship, the Respondent entered into a relationship with his current de facto wife, Brenda Ellis. Despite the relationship being a positive and fulfilling one (statement, para 34), the Respondent described continuing difficulties in coping with his pain and low self esteem. He became worried by his feelings of anger and distress and sought psychiatric assistance to deal with those feelings.

18. The Respondent began living with Ms Ellis at her Department of Housing flat in Waterloo in about June 1991. The premises comprised three bedrooms, a living room and adjoining kitchen. When he first moved in, there were four young children living there in addition to the Respondent and Ms Ellis. Living conditions were described as unsatisfactory. It was crowded, the flat was unhygienic and in very poor repair and the Respondent was worried about the safety of the children in the neighbourhood. All these things added to the Respondent's emotional distress and feelings of anger.

19. Prior to living together, Ms Ellis had been receiving Sole Parent Pension. The Respondent gave evidence that shortly after he moved in with Ms Ellis, they advised the Department of Social Security that they were cohabiting and that he would be living at Waterloo. In respect of his sickness benefit claim his residential address had previously been recorded as Gardners Road Rosebery (transcript pp 12-13). He understood, therefore, that the Department of Social Security knew his current address.

20. Their child, Paul, was born on 22 August 1991, nine weeks premature. The parents were advised that the child was at increased risk of respiratory illness and that they should move premises because of the poor state of the house. The Respondent and Ms Ellis were unsuccessful in their approaches to the Department of Housing to have the family relocated to more suitable premises, and they could not afford market rent in private rental accommodation which would be large enough for their family.

21. The Respondent's personal injury action was settled on 12 May 1992. At this time, he was still attempting to relocate housing and Ms Ellis was pregnant with their sixth child. The total settlement was for $300,000 out of which $92,955.79 was refunded to the compensation insurer for weekly workers' compensation payments received by the Respondent. On the basis of this settlement, the Department of Social Security's Compensation Recovery Section calculated a preclusion period of 175 weeks from 13 May 1992 to 19 September 1995. These details were contained in a letter to the Respondent dated 16 June 1992, but this letter was sent to the old Rosebery address, not to the Waterloo address (T19, p 39). The Respondent gave evidence that he did not receive this letter and was therefore unaware of any preclusion period. His evidence was that he had not lived at Rosebery since June 1991 and his father, whose house it was, had also left there by June 1992 (transcript p 16).

22. When the offer of settlement was made to the Respondent, he was told by his solicitors that he could expect to receive $173,000 after repayment of workers' compensation payments, legal expenses and a litigation loan. He discussed the offer with Ms Ellis and accepted on the basis that it would be enough money to buy a house for the family (statement para 36). The Respondent's evidence was that his legal advisers did not explain the preclusion period to him and although there was some mention of a preclusion period prior to settlement, there was never a full explanation given to him.

23. There was apparent concern from many people around the Respondent that the settlement money be used for a constructive purpose and be used in a way that he could not have access to use the money for drugs. Ms Ellis, the Respondent's parents and the Respondent's solicitor all supported the action of purchasing a house and a deposit was placed on a house in Blacktown very quickly after the offer of settlement was accepted. In his statement, the Respondent said that "Within a week of settlement I went to look for a house, this is how urgently I treated the need to tie up the settlement money so I wouldn't misuse it." (para 45). The Respondent's compensation solicitors acted for him on the purchase of the house, which was settled on 31 July 1992 (see solicitor's letter dated 4 August 1991 at T22, p 43). The purchase price was $156,000 plus associated costs. The balance of the compensation money was used to repay debts and purchases were made such as a cot for the new baby, bedding, removal costs, television and freezer.

24. In his statement, the Respondent set out the reasons for the purchase of the house. At paragraph 49 he states -

"I purchased the home for the best reasons and motives. These

included the health risk to my son Paul of remaining in the Waterloo

residence; the refusal of the Housing Commission to relocate my family

to larger and more suitable premises; the financial difficulty, given

my incapacity for work, in paying private rent for a house suitable

for my 8 member family to reside in; my fear at having access to a

large sum of money, such as the settlement funds from my personal

injury money, due to my past history of drug abuse. I sincerely

wished to continue in my drug free lifestyle and did not wish to have

the temptation of access to a large amount of money. I believed it

best that this money be tied up in a house which would provide safe

and appropriate housing for my six children."

25. The Respondent's fears that he could start using heroin again if he had access to a large amount of money were expressed to the Tribunal. His evidence was that he had not used heroin since August 1991 when his son Paul was born. He said that he felt responsible for the child being born prematurely and decided to stop using heroin. When asked whether he would ever use heroin again, the Respondent answered -

"I honestly can't guarantee that I will never use again. There is

no guarantee that you can't - you won't use again. I can say

today that I won't use today but I can't say that I'll never use

again. I'd be lying to everybody in here.

And what stops you using today?---Security of my family: what I

have to lose: just - I can't afford to use. I don't mean

financially, but I just - I mean emotionally and mentally - I

can't afford to use, you know." (transcript p 6).

26. The family moved to Blacktown and on 7 September 1992 the Respondent lodged a claim for disability support pension with his local social security office (T4). The Respondent recalled that shortly after his application he was advised by the Department of Social Security that he was not eligible to receive the pension until September 1995. He gave evidence that this was the first time he had realised that there was to be a preclusion period imposed on him by the Department of Social Security.

27. After the Respondent was advised that neither he nor his partner qualified for a social security pension because of the preclusion period, the only income the family had was family allowance and family allowance supplement (called additional family payment since 1 January 1993). This continued until April 1993, when the pension began to be paid to the Respondent following an unsuccessful application by the Applicant to stay the decision of the Social Security Appeals Tribunal. However, arrears of pension payment were stayed pending this Tribunal's decision on the substantive issues.

28. In the period between August 1992 and April 1993, the family experienced considerable financial difficulties. There were bills to pay and they were often forced to borrow money. In particular, the Respondent's pensioner parents provided $50 per fortnight out of their pensions, and the family also relied on assistance from St Vincent de Paul in the form of food vouchers and monetary assistance to pay electricity bills and water rates. Their financial situation has been helped since the receipt of disability support pension and wife pension, but the family still owed money and assistance again was sought from St Vincent de Paul for payment of water rates.

29. At the time of the hearing, the Respondent still owed about $500 for land rates, $780 deferred stamp duty on the purchase of the house and $700 to his father. Neither the Respondent nor Ms Ellis have any savings.

30. It was the Applicant's submission that although there were circumstances in this case which justified some shortening of the preclusion period the circumstances were not such as to justify disregarding the whole of the amount as the SSAT had done. The Applicant conceded that there had been departmental error when the letter detailing the effect of the compensation award was sent to the Rosebery address, despite the fact that the Respondent had advised of his change of address to Waterloo in about June 1991. The Applicant also conceded that the letter that went to Rosebery dated 16 June 1992 was sent shortly before the Respondent purchased the house at Blacktown.

31. It was, however, the Applicant's contention that the failure of the Respondent's solicitors to give him appropriate advice regarding the effects of the payment was a material factor in this case. It was submitted that the Respondent may have some action against his solicitors for the incorrect advice, but that the public purse should not be imposed upon. The Applicant relied on the case of Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 for the proposition that incorrect legal advice was not a "special circumstance".

32. It was submitted by the Applicant that the discretion in this case could reasonably be exercised to disregard so much of the compensation award as would allow the preclusion period to end at the end of 1994, allowing pension to be paid from the beginning of 1995. That date appears to have been chosen arbitrarily, but it seems that the basis was that it would be a recognition of departmental error and the Respondent's difficult circumstances.

33. The Respondent's submission was that the SSAT's exercise of its discretion was appropriate in light of the circumstances of this case. Insofar as the incorrect legal advice was concerned, the Respondent submitted that this factor of itself was not being put as a "special circumstance", but the lack of advice from the compensation solicitors was important in relation to the Respondent's state of mind when he purchased the house in Blacktown.

34. There are numerous cases which have dealt with the issue which is before this Tribunal. It is generally accepted that the term "special circumstances" is not capable of precise definition, and the cases generally accept the following interpretation which was set down by the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 -

"The qualifying adjective looks to circumstances that are unusual,

uncommon or exceptional. Whether circumstances answer any of

these descriptions must depend upon the context in which they

occur. For it is the context which allows one to say that the

circumstances in one case are markedly different from the usual

run of cases. That is not to say that circumstances must be

unique but they must have a particular quality of unusualness that

permits them to be described as special." (at p 3).

35. The rationale for the compensation provisions in the Social Security Act 1991 is to avoid "double dipping" by people who receive certain social security payments and also receive awards of compensation. Although the general principles of Part 3.14 of the Act must be kept in mind, the Tribunal must respond to circumstances in any particular case which would lead to an unjust, unreasonable or otherwise inappropriate outcome if the liability created by the provisions were strictly enforced (see Re Ivovic and Director-General of Social Services [1981] AATA 57; (1981) 3 ALN N95).

36. In considering the application of the Tribunal's discretion in this case, it is essential to look at the whole of the circumstances presented by the evidence rather than taking each factor or aspect of the case in isolation (see Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464).

37. The Tribunal was impressed by the manner in which the Respondent gave his evidence. He gave his evidence frankly, without exaggeration, and we accept him as a credible witness.

38. On the basis of the evidence before us we find that the Respondent struggled for more than half his life with heroin use and repeatedly made efforts to rehabilitate himself and give up the drug. He has spent time in gaol on drug related offences. Soon after he successfully completed a course of rehabilitation and obtained employment he sustained serious back injuries as a result of two work accidents and has not worked since. The period following his accidents was marred by pain, numerous admissions to hospital, emotional distress and low self-esteem because of his perceived lack of productivity These pressures resulted in the failure of a ten year relationship and a further erratic pattern of heroin use, which at times he used to obtain relief from his back pain. During a particularly difficult time in 1989 he received a letter from the Applicant advising him, in general terms, of the possible effects of a compensation award on his social security entitlements. It is not surprising, in the Tribunal's view, that the details of that letter were forgotten by the Respondent by the time of his settlement in May 1992.

39. The Tribunal finds that the Respondent entered into a new and fulfilling relationship with Ms Ellis, but the sub-standard and cramped conditions in their Department of Housing flat raised feelings of anger and violence in the Respondent, for which he sought psychiatric treatment. The Respondent also advised the Applicant of his change of address about June 1991 when he began to live with Ms Ellis. Further problems arose with the premature birth of their son, Paul, for which the Respondent considered himself partly responsible. He ceased heroin use from August 1991, and made unsuccessful approaches to the Department of Housing to move his family into more acceptable, hygienic premises. He was unable to afford private rental accommodation for his large family.

40. At around this time the Respondent accepted lump sum settlement. The acceptance of this and his investment of it in a house seemed to him and to his various advisers to be a solution to his housing and social problems. The Respondent gave many reasons why this option was acted upon - (a) to stop him from having access to the money to purchase heroin; (b) to provide some security for his family; (c) to enable his family to live in more adequate and hygienic accommodation; (d) to move his family to a location he considered safer for his children; and (e) to move himself away from his old contacts in the Waterloo area where he may be tempted to buy heroin.

41. The Tribunal finds that the Respondent made this decision in good faith, effectively unaware of the preclusion period which would be imposed by the Applicant. This was due to a combination of lack of advice from his compensation solicitors and an administrative error on the part of the Applicant which sent the letter advising him of the details of the preclusion period to the wrong address. Without the pension income from social security, the family is placed in a position of considerable financial hardship, relying on loans and handouts from his pensioner parents and welfare organisations to survive.

42. It would be difficult, in our view, to describe a set of circumstances which are more "special" than those found in this case. We agree with the Respondent's submissions that all the factors involved are inextricably linked and the situation must be viewed in its totality.

43. We accept there is ample authority for the proposition that inadequate legal advice is, in itself, insufficient to constitute "special circumstances", but the other factors in the case overwhelm this issue. We agree with the Respondent's submission that the significance of the lack of advice was the consequential state of mind of the Respondent which resulted, in that he acted effectively without knowledge of the preclusion period. Such an approach was taken in Re Venables and Secretary, Department of Social Security. (1988) 15 ALD 180 where the Tribunal focussed not on the failure of the solicitor to properly advise the Applicant but ". . . the absence of knowledge of the person settling that sickness benefits will be recovered, whatever the cause of that lack of knowledge" (at p 183).

44. The Respondent's lack of knowledge was compounded by the Applicant's conceded administrative error in not sending the letter advising of the preclusion period to the correct address, even though the Respondent had advised of his change of address about a year earlier. We consider this to be a significant omission on the part of the Applicant.

45. It is true the Respondent now has a valuable asset in the form of an unencumbered home, but the reasons for the purchase of the home are, in our view, entirely reasonable and justifiable given the matters raised in the evidence. The balance of the money was used to repay debts and make modest purchases. The family's financial situation is precariously balanced if the Respondent and his partner receive pensions, but on the evidence, the economic position is clearly insufficient without the pension income. The Respondent's ability to earn money from work is extremely limited given his medical condition.

46. Apart from the material security the home represents for his family, the home also provides emotional security for the Respondent, which may well result in him not resorting to using heroin again. The Tribunal was impressed by the candour in which the Respondent gave evidence about his drug habit.

47. It is the Tribunal's view that to impose a preclusion period in this case could be potentially disastrous for this family. It is not in the interests of the members of this family, nor in the wider community interests, to jeopardise the progress the Respondent has made over many years in relation to his heroin use and his situation generally. In our view, it would be unreasonable and inappropriate to enforce any liability imposed by the Act in this case. We do not accept the Applicant's contention that only so much of the compensation payment ought to be disregarded as would reduce the preclusion period to the end of 1994.

48. The Tribunal finds that the discretion in section 1184 of the Act should be exercised in the special circumstances of this case to treat the whole of the compensation payment received by the Respondent as not having been made. The Tribunal therefore affirms the decision under review.