Winterbotham; Secretary, Department of Social Security and [1990] AATA 808 (11 December 1990)

6. On 7 June 1969 the respondent appealed to the SSAT against the decision of 15 September 1988 and on 5 July 1989 the SSAT affirmed the decision, stating inter alia, "The Tribunal suggests that consideration of special circumstances should be considered favourably at some stage in the future when Mr. Winterbotham finds that his financial resources have been seriously depleted." (T20). The respondent next applied for special benefit on 31 July 1989. On 3 August 1989 a delegate, of the applicant decided that special circumstances did not exist to warrant treating any part of the respondent's compensation payment as not having been made and so the preclusion period remained intact. The respondent then appealed to the SSAT for review of that decision and on 21 September 1989 a majority decision stated inter alia, "The Tribunal believes very strongly that there are special and exceptional circumstances in this case which make it unjust and unreasonable for the Department to continue to subject Mr. and Mrs. Winterbotham to preclusion of Special Benefit until September 199 4. The Tribunal is of the view that Mr. and Mrs. Winterbotham should be eligible for Special Benefit and that this be granted to them three weeks after the Tribunal hearing." (T35). The minority decision, while not considering that special circumstances existed, recommended that Mr. and Mrs. Winterbotham receive urgent support from a Departmental social worker to provide assistance in financial management and employment re-training.

7. The applicant appealed to the Administrative Appeals Tribunal against the decision of the SSAT and on 2 March 1990, as the result of a consent agreement by the parties, the Tribunal, without proceeding to a hearing, decided that 50% of the lump sum compensation figure of $225,000.00 was deemed to be for in-capacity (T40). Accordingly, the preclusion period was recalculated to end on 22 July 1992.

1. In the meantime the respondent, after applying several times to the Department of Community Welfare for emergency relief, had gone back to work at Detmold Packaging at the end of October 1989. For several months he performed the same duties as previously, until January 1990 when he began working as a fork-lift driver. He stated in his evidence that he believed that the driving would mean less strain on his back, but eventually that too, began to cause him pain. In February 1990, he took out a personal loan of $10,000.00 for home improvements, and it was his evidence that he had believed he would have no difficulty in repaying this amount as he was in full-time employment.
2. In March 1990 the respondent and his wife were involved in a motor-vehicle accident which caused extensive damage to both motor-vehicles involved. The respondent's own vehicle was not insured, nor did he have 3rd-party property insurance and a claim in respect of the other vehicle has been made against him for $4,300.00. The respondent had his vehicle repaired and then he sold it, leaving the family without private transport. Mrs. Winterbotham was hurt in the accident, suffering an injury to her right knee which necessitated her resting for four to five weeks. Both the respondent and his wife stated that Mrs. Winterbotham had been experiencing some health problems since the birth of her children and the addition of the knee injury made it impossible for her to care for them. As the respondent's back was continuing to cause him pain and restriction of movement, and the sale of his motor-car made the 70 kilometre return journey to work each day almost impossible, he resigned his employment to look after his family. On 27 March 1990 he applied again for special benefit (T43).

10. A delegate of the applicant determined on 17 April 1990 that the respondent's health and financial circumstances did not constitute special, unusual and exceptional circumstances. The respondent appealed against that decision to the SSAT, which set aside the delegate's decision and found that the respondent was eligible to receive special benefit. This decision led to the application for review by this Tribunal.

1. The commencement date for the preclusion period was originally 15 October 1987, that being the day after the respondent received his lump sum payment by way of compensation. At the hearing of this application Ms. Powell pointed out, quite correctly, that the commencement date of the preclusion period should be pursuant to the provisions of s,152(3)(b) of the Act, namely the day after the day on which the last of the weekly payments by way of compensation was made to the respondent. The parties agreed that on this basis the preclusion period concludes on 15 January 1992.
2. Thus, on 14 October 1987 the respondent's compensation claim was settled for $225,000.00. After paying all expenses he received the sum of $215,000.00 and he and his family lived on that money for the major portion of the period from settlement to the hearing. In March 1989 the realisation that his family could not continue to live on the dwindling capital forced the respondent to return to work. At the date of hearing, slightly less than 3 years after the settlement date, not only had all of the lump sum been expended, but the respondent also had the loan of $10,000.00 to repay. He stated that from the time he left work in March 1990 his family had received no income, apart from the Family Allowance Supplement paid to his wife, until an application for a stay of the SSAT decision resulted in unemployment benefit being paid to him some weeks before the hearing. Prior to this, the respondent and his family had survived on gifts of food from their families and the emergency relief provided by the Department of Community Welfare.

13. The respondent's assets at the date of hearing consisted of unencumbered house and land valued at between $125,000 and $135,000, furnishings and personal property, which included a Volkswagen motor car. In addition to the personal loan, the respondent's liabilities consisted of an outstanding electricity bill, motor vehicle registration, the motor vehicle claim against him and a gas bill, and totalled $4,926.84 (Exhibit R7). He estimated his weekly living expenses as being approximately $293.00 and it was his evidence that he had no money left from his settlement sum and neither he nor his wife had anything more than nominal amounts of money in bank accounts.

1. The respondent's evidence of his family's difficult financial situation was confirmed by his wife. It was her evidence that she had tried to find employment, but due to lack. of work experience and ill-health she had been unsuccessful. Since the motor vehicle accident in March 1990 her physical condition had made it even more difficult for her to work and she stated that even if she could find employment, the cost of child-care was prohibitive. The Tribunal has no hesitation in accepting the evidence of the respondent and his wife as to the events which led to this application for review.
2. With regards to the respondent's own capacity for employment, the Tribunal accepts that he has some earning capacity remaining. A report prepared for the respondent's solicitor by Mr. M. Smith, surgeon, on 17 July 1990 indicates that his back disability in general terms is of the order of 30% (Exhibit R2).
3. It was agreed that the only issue before this Tribunal is whether the respondent's circumstances warrant an exercise of the discretion contained in s.156 of the Act which reads as follows:

"The Secretary may, for the purposes of this Part, treat the whole or part of a payment by way of compensation that has been, or that will be, made as not having been made or as not likely to become liable to be made if the Secretary considers it appropriate to do so in the special circumstances of the case."

Ms. Powell submitted that the respondent's circumstances were such as to warrant the discretion being exercised in his favour.

17. As to what constitutes "special circumstances" for the purpose of the Social Security legislation the Tribunal has had regard to a number of authorities of the Administrative Appeals Tribunal and the Federal Court, including Beadle v Director-General of Social Security [1984] AATA 176; (1985) 7 ALD 670: Re Beadle & Director-General of Social Security [1984] AATA 176; (1984), 6 ALD 1, (1985) 7 ALN N193: Re Ivovic & Director-General of Social Services [1981] AATA 57; (1981) 3 ALN N95: Re Krzywak & Secretary, Department of Social Security (1988) 15 ALD 690, Re Hajar & Secretary, Department of Social Security (1988) 16 ALD 716: Re Jerkin & Secretary, Department of Social Security (1988) 14 ALD 480: Re Secretary, Department of Social Security & Bolton (1989) 18 ALD 464. In Re Ivovic the Tribunal said, "The reference to special circumstances 'by reason of which' a person liable 'should be released' requires, in our view, 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 to the principle of liability which the Act otherwise establishes". The Tribunal continued "... he (the decision-maker) 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".

18. In Re Beadle the Tribunal said, "An expression such as 'special circumstances' is by its very nature incapable of precise or exhaustive definition. 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. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special". In Beadle's case the Federal Court approved that passage, saying "While we would place less emphasis on one dictionary definition of special we are in broad agreement with the approach of the Tribunal and are in agreement with its conclusion". Mindful of these considerations, the Tribunal turns now to the question of whether Mr. Winterbotham's particular circumstances are so special or unusual as to justify the making of an exception to the principle of liability imposed by the Act, referred to in Re Ivovic.

19. The respondent submitted that at the time he received his settlement sum, the relevant legislation did not preclude him from receipt of benefit and it was not until June 1988 that the retrospective effect of the amendments to the Act had that effect. In itself, retrospective legislation is not a special circumstance; it applies equally to any number of people and not uniquely or unusually to any one person, and a Court or Tribunal is bound to apply it if the intention of parliament is clear, harsh though a retrospective effect may seem, (Re Krzywak supra). This particular piece of legislation (the Social Security Amendment Act 1988, no. 58 of 1988) 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, i.e. the very situation of this respondent. 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 tax-payer.

20. At the time the respondent made the subject application for special benefit, he was aware that the legislation precluded him from receiving such benefit, a very different situation from that in Re Krzywak where the application for benefit was made before the relevant amendments were enacted. Had that application been heard earlier, it would have been found that a previous refusal to pay invalid pension to Mrs. Krzywak(was incorrect, and she would not have lost her previous entitlement to pension. In the present respondent's case, his application for invalid pension was rejected in August 1988 as he was considered not to meet the relevant criteria: hence he had no entitlement affected. In Re Krzywak, the retrospective effect of the legislation was held to be a special circumstance: not only did it deprive that applicant of an entitlement to pension, but she did not receive the benefit of s.152(2)(c)(i) of the Act (the "50% rule") which can result in the reduction of a preclusion period. Again, this is not the case in the instant matter where the 50% rule was conceded to apply to the respondent, and his period of preclusion from benefit was accordingly reduced.

1. The fact that at the time of his compensation award the respondent thought that he could get a benefit is also not a special circumstance. Nor is wrongful advice from a solicitor. The Tribunal in Re Bolton (supra) referred to this latter situation, saying at para 24, "No doubt if the present respondent had been properly advised as to his potential preclusion from receiving a pension for some years he may not have gone ahead with buying and renovating the property ... Overall, this factor is not persuasive or determinative and the best view is that the matter is one, if at all, as between solicitor and client".
2. It was submitted that the Tribunal should have regard to the fact that at the time of the respondent's, compensation settlement he was a very young man and his weekly wage, on which his future economic loss was calculated, was low. The Tribunal does not consider that this is so unusual, uncommon or exceptional as to constitute a special circumstance.
3. Evidence was given as to the financial hardship suffered by the respondent. Financial hardship alone does not amount to special circumstances (Re Beadle supra) and for financial circumstances to be considered special, the hardship must be exceptional (Re Colaiacolo & Secretary, Department of Social Security, Decision 2109, 24 April 1985). The respondent is certainly in straitened financial circumstances: he has a dependent wife and family, with all the attendant expenses and financial liabilities, a personal loan of $10,000 to repay, a common-law claim against him of some $4,000 and no income or savings. He also has assets of at least $130,000.00. His situation cannot be compared with that of the applicant in Re Krzywak where financial circumstances were considered to be special. Mrs. Krzywak had no income or savings, but unlike the present respondent she had no means of providing for her own support.

24. The respondent contended that he was perfectly entitled to have expended his settlement moneys in providing his family with a home and no-one, least of all this Tribunal, would dispute that. However, that is not the issue - it is the fact that the respondent, having disposed of his settlement moneys, now seeks support from the community. The emotional attachment of the respondent and his wife to the family home was obvious and their reluctance even to think of selling it understandable. However, the Tribunal roust take that home into account in deciding whether the respondent is in a position of exceptional financial hardship. While the respondent has assets of such value he can never be so regarded.

25. As to the submission that the respondent should not be forced to sell his house, the Tribunal would compare his position with that of another recipient of a compensation award who chooses to expend his compensation moneys on investments. Should there be any difference between one who invests his money in stocks and shares and one who invests in real estate? Neither should expect the tax-payer to support him while he holds on to assets he could well realise and use to support himself. This is not to say that the Tribunal seeks to force the respondent to sell his house; or even recommends that course of action. It is not the Tribunal's role to do that. At the same time, the Tribunal cannot ignore the view that the selling of the house is one way by which the applicant could resolve his present difficulties. It is an evident cause of action, although not by any means the only one.

26. Ms. Powell submitted that such a course could be a catastrophic event in the marriage of two young people such as the respondent and his wife, with adverse effects on their children. While the Tribunal sympathises with this possibility, it remains only a possibility. If the house were sold and the majority of the purchase moneys invested wisely for the remainder of the preclusion period, the respondent and his family could perhaps manage on the rest and the return from it, leaving them capital to invest in another house of more modest cost, less isolated from areas of employment, schools etcetera. In recording this possibility, the Tribunal is not recommending it, but is using it as an illustration that the respondent and his wife are not as bereft of opportunities to ease their situation as it might seem at first sight.

1. It should also be borne in mind that whilst the respondent's back condition has reduced his capacity to work, it has not destroyed it. The remaining work capacity may well enable him to find part-time employment, which would still leave him time to help his wife care for their children.
2. For the reasons given, the Tribunal decides that special circumstances do not exist to warrant an exercise of the discretion contained in s.156 of the Act and accordingly sets aside the decision under review.

1. This reference relates to Part XVII - Payments by Way of Compensation - of the Social Security Act, 1947 ('the Act') and more particularly s.156. That section provides the Secretary with a discretion to treat the whole or part of a payment by way of compensation as not having been made. Such discretion can only be exercised if the Secretary considers it appropriate to do so in the special circumstances of the case. The task of the Tribunal is to determine whether special circumstances exist in this reference and if they do whether the whole or part of the compensation should be excluded in calculating a preclusion period.
2. The majority decision of the other members of the Tribunal has been considered and I have no disagreement with the facts as recited. Subject to the following additions I adopt them as my own.
3. The effect of the work-related injury suffered by the respondent on 8 May 1984 was severe. A lumbar fusion operation was performed and yet it seems that the respondent continues to experience resultant pain and discomfort. I accept that he has a serious disability which precludes him from gaining employment in the only area in which he has any labour to sell and that is in the general labouring market. In my view, the prospect of his re-employment in any area is remote.
4. The evidence given by the respondent's wife indicates that she had applied her best endeavours in seeking employment and that failure to do so resulted from poor health and lack of opportunity. I accept that evidence and see no reasons for a change in those circumstances.
5. In my view additional comment is called for on the manner in which the compensation award was expended. The amount received by the respondent was $215,000, i.e. award figure of $225,000 less legal expenses of $10,000, out of which he paid $104,122 for purchase of land and construction of a home. In addition, $8,733 was outlaid on further improvements to the property, $11,910 on furniture, $27,169 on a Holden car including insurance, $2,055 on a motor bike and about $4,000 on rehabilitation and job training schemes. It appears as if the remainder, i.e. $57,011, has been applied in paying for normal type living expenses incurred during the period 27 October 1987, i.e. the date of receipt of the award, to current times. It should also be recorded that the respondent borrowed $10,000 from a bank in February 1990 and that those monies were spent in making further capital improvement to the home. At that stage the respondent was in employment and held an expectation that that position would be maintained. Had that not been the position then such a course of expenditure would not have been undertaken. I accept that explanation and accordingly reject the submission, inferred or otherwise, that the respondent set out to create a situation of need and dependency.

6. The term 'special circumstances' has been considered in Re Ivovic and Director-General of Social Services (1981) 3 ALN 95; Re Beadle and Director-General of Social Security 6 ALD 1 and Beadle v Director-General of Social Security [1984] AATA 176; 60 ALR 225 ('Beadle's case'). In Re Ivovic the Tribunal at p.97 said -

"The reference to special circumstances 'by reason of which' a person liable 'should be released' requires, in our view, 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 to the principle of liability which the Act otherwise establishes ... Thus whilst keeping the dominant principle of s.115 in mind, 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." (emphasis added)

"An expression such as 'special circumstances' is by its very nature incapable of precise or exhaustive definition. 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. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."

This passage was approved by the Federal Court in Beadle's Case. The Court at p.230 said:-

"While we would place less emphasis on one dictionary definition of 'special', we are in broad agreement with the approach of the Tribunal and are in agreement with its conclusion." '

1. The factors which appear relevant to the exercise of the discretion in this issue are the effects of the retrospective amendments to the legislation, financial hardship, health and children.
2. Legislative changes

Under this heading, it is essential first to consider the position as at 27 October 1987 when the compensation award was received. At that time the preclusion period had no application to the respondent, and that fact was made known to him. He anticipated that in the event of health failure an entitlement to assistance from the Department of Social Security would be forthcoming. Armed with that knowledge and advice from banks and the like he took what appears to be the sensible decision to acquire a home to accommodate himself and his young family. Then in September 1988, a time when his state of ill health prevented employment, he was told that an amendment to the law in June of that year precluded him from any entitlement until September 1994, a date later adjusted to July 1992. If that position is to prevail then in my view the respondent has no alternative but to realise upon his home to ensure the survival of his family. To entertain other options is fanciful. I am in no doubt that the respondent views such a result as catastrophic.

1. It is abundantly clear that Parliament, in the retrospective Act, intended that the legislation operate retrospectively notwithstanding that in some instances it may work some injustice. More to the point it should be borne in mind that this reference relates to the application of a section which provides the Secretary and this Tribunal with a discretion to rectify any such injustice.
2. Having regard to all of the circumstances, I am of the opinion that the effects of the legislative change are unusual, uncommon and exceptional. Certainly I am not aware of any other citizens being caught in such a dilemma nor have any such cases been brought to my attention. Furthermore I consider that the result created by the change would be unjust, unreasonable and inappropriate.
3. Financial Hardship

It is well settled that financial hardship by itself does not amount to special circumstances (Re Beadle supra) but that the presence of exceptional hardship is a factor to be given weight in a determination of this nature (Re Cocaiacolo and Secretary, Department of Social Security Decision No.2109 of 24 April 1985).

12. It is my opinion that exceptional hardship exists in this reference and in forming that view I have had regard to both the asset/liability and income/expenditure tests. Prior to those examinations it is appropriate that I express my views on whether the residence costing in all about $113,000 and now worth somewhere in the region of $125,000/$135,000 should be realized upon, and the proceeds applied towards future family maintenance. While the representative of the Department resiled from the making of such a submission, it is my view, and I repeat it, that a continuation of the status quo leaves no other option. The question discussed in the hearing of this reference and which requires an answer is whether, having regard to other provisions of the Act, a person's home is for the purpose of s.156 untouchable. Those other provisions relate to the asset test and more particularly the exclusion of an applicant's home irrespective of its value. My view is that it comes down to a question of extent and degree. If, for example, a person in need has expended $300,000 on the acquisition of a home then a sale should be envisaged when considering this section. In other words, it depends on the particular circumstances rather than on a rule of thumb. In this present reference, I acknowledge that the choices made by the respondent appear mildly excessive and yet not in my opinion sufficient to warrant a conclusion that the home should be sold. In reaching that view I have had regard to the submission that not all of the incapacity component of $112,500 has been applied to the purchase of the home. The monies required for that purpose came from a joint fund consisting of an incapacity component of $112,500 and a non incapacity component of a like amount. For the mathematically inclined it appears reasonable to conclude that only one half of the incapacity component was used towards the acquisition of the home.

13, The effect of that decision is that the respondent is left with assets consisting of VW car and furniture and liabilities in the region of $15,000. However, for the sake of completeness, let the assumptions be made that the home should be sold, that the cash fund remaining after sale and payment of agent's commission and all debts is $100,000 and that an investment yield of 12% p.a. is obtainable. According to my calculations $154 per week remains after allowing for income tax and rent of replacement accommodation ($3,640 per annum, i.e. $70 per week). Not a princely sum especially when compared with this family's weekly expenditure budget of $220.

14. The other possibility is that part only of the net proceeds be invested with the balance being utilised to defray the costs of living during the remainder of the preclusion period. At that stage the cash fund will be some figure less than the $100,000 and yet, presumably, the cost of then acquiring a family home will have increased. Moreover additional dollars will be needed to meet the cost of living, particularly with the children requiring an education, In my opinion such a course of action represents a one way ticket to poverty.

I am satisfied that the respondent has suffered and continues to suffer significant pain and discomfort in the lower lumbar region and that the extent of that condition precludes employment. Furthermore, and in the event of employment being undertaken as a last resort, I share his wife's fear that such activity could worsen that condition. In short, he does not have the capacity to provide for himself and his family.

1. Finally and by no means of least importance, is the position of the two very young children. Lack of current financial assistance will cause not only hardship but leave them with no means of support. According to the decision in Re Latour and Secretary, Department of Social Security (1988) 16 ALD 279 this is a matter of some significance.
2. Conclusions

Having considered the relevant circumstances of the respondent in their entirety, my view is that they may fairly be described as unusual, uncommon or exceptional and that it would be unjust, unreasonable or inappropriate not to treat the whole of compensation payment as not having been made.

I certify that this and the five (5) preceding pages are a true copy of the decision and reasons for decision herein of Mr D.J. Trowse (Member)