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Social Security Reporter |
Disability support pension: compensation preclusion period; special circumstances; duty to give reasons for decision
Decided: 21st June 2006 by French J.
On 3 February 1993 Homewood injured his neck as the result of a swimming pool accident. His injury resulted in partial quadriplegia. He was in hospital for nine months in Brisbane and was then transferred to the Shenton Park Campus of Royal Perth Hospital. He underwent inpatient and outpatient rehabilitation for five years. By 1998 he was able to walk with the aid of an elbow crutch and was able to drive a car.
In July 1997 Homewood was awarded compensation of $1,250,000. On 17 July 1997 Centrelink informed him that as a result he would be precluded from receiving any compensation affected Centrelink benefit for a period of 1,550 weeks from 3 February 1993 until 18 October 2022.
On 8 August 2001 Homewood sustained further neck injuries in a motor vehicle accident and was confined to a wheelchair.
On 10 September 2001 Homewood lodged a claim with Centrelink for disability support pension (DSP). On 14 September 2001 Centrelink informed him that the claim had been rejected because of the application of the preclusion period. He requested a review of the decision. On 14 January 2002 an authorised review officer (ARO) affirmed the decision to reject the claim.
On 20 April 2004 Homewood lodged a further claim for DSP. On 22 June 2004 the original decision-maker informed him that the calculation of his preclusion period was correct and as no special circumstances could be identified in his case, it was not possible to exercise any discretion to reduce the preclusion period. He requested a review of that decision, but it was affirmed by an ARO on 19 October 2004 and by the SSAT on 17 December 2004.
On 6 January 2006 the AAT set aside the decision under review and substituted a decision that ‘so much of the compensation payment received by Homewood be treated as not having been made such that the preclusion period ends on 1 July 2006’.
On 2 February 2006 the Secretary of the Department of Employment and Workplace Relations lodged an appeal, in the original jurisdiction of the Federal Court, against the AAT’s decision. In the grounds of appeal the error of law was said to be the failure of the AAT to provide reasons for its decision to reduce the preclusion period so that it expired on 1 July 2006 in contravention of s.43(2) and (2B) of theAdministrative Appeals Tribunal Act 1975 (Cth) (the AAT Act).
Section 17(1) of the Act defines the term a ‘compensation affected payment’ to include DSP. Section 1169(1) of the Act provides that a compensation affected payment is not payable during a lump sum preclusion period.
The method for calculating a lump sum preclusion period is set out in s.1170(4) of the Act. It involves dividing the compensation part of the lump sum payment (in this case 50%) by the income cut-out amount.
Section 1184K of the Act provides, inter alia:
(1) 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.
Section 43 of the AAT Act provides, in the relevant parts:
(2) Subject to this section and to sections 35 and 36D, the Tribunal shall give reasons either orally or in writing for its decision.
(2B) Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.
Before the AAT the parties agreed the date of the accident, the amount of the compensation payment, and the calculation of the preclusion period, 3 February 1993 to 18 October 2022. The issue was whether special circumstances existed that would make it appropriate to treat the compensation payment either in whole or part as not having been made.
In its reasons the AAT set out Homewood’s evidence about his income and expenses and about what had happened to the compensation payment he had received.
Homewood’s outgoings included $500 per month for house repairs to make his house wheelchair accessible. There was a fortnightly deposit of $10 into a bank account which was a repayment of a loan by his brother. He had to catheterise six to eight times daily and purchase catheters in bulk at a cost of $157.50 for 150. Since his accident he had suffered recurrent urinary tract infections and depression.
He was unable to qualify for emergency housing because he did not have any income. He believed his situation would change if he was paid DSP.
Homewood’s evidence was that out of the lump sum compensation of $1,250,000 he received $995,000 after costs. He spent $140,000 on vehicles for himself and family members, most of which he later resold at a loss. He spent $363,000 on a 24 acre property and improvements to it but then was forced to sell it at a loss following his second accident. In July 1999 he purchased the lease of a video store for seven months for $20,000 plus an additional $10,000 for stock. The outgoings of the business were greater than cash coming in so he sold what remained of the lease at a loss of $2000. Some of the videos he sold for about $5000. He set up a $300,000 portfolio with Westpac in October 1997 which paid him an income of $1500 per month. He started debiting increasing amounts each month and by late 2002 this was gone.
Homewood told the AAT he was owed $28,500 by his brothers. One loan was being repaid at $10 per fortnight.
Homewood told the AAT his assets were a station wagon valued at $3000, furniture worth $3000, a car worth $5000 which he bought for one of his brothers, assets with Fremantle Auctioneers valued at approximately $12,000, DVDs worth $4000 and books, magazines, coins and medallions worth about $4000.
The AAT set out the relevant statutory provisions and then considered Homewood’s financial hardship which to qualify as ‘special circumstances’ must be ‘truly exceptional’. It accepted his evidence that he had little left of value despite receiving a compensation payment totalling $1,250,000 in 1997. It accepted his evidence about his remaining assets and loans of $28,500 he had made to two brothers. The AAT found that the $28,000 was unlikely to be recovered and was currently being repaid at $10 per fortnight.
The AAT concluded that Homewood’s financial circumstances had arisen primarily because of his inability to handle money, his lack of skills, his naivety and, at times, reckless purchasing. The AAT did not conclude that he had been unreasonable in the expenditure of the lump sum. It found that his background had not prepared him for dealing with large sums of money.
On the question of ill health, the AAT accepted Homewood’s evidence that his circumstances had declined significantly following the 2001 accident, that he was now confined to a wheelchair and that he was on a range of medication for conditions including diabetes and depression. The AAT accepted that his current housing situation was not adequate and that without income he would not qualify for public housing even if an appropriate house were to become available.
The AAT’s reasons concluded as follows (at [54] – [56]):
...Little is to be gained now by pointing to the folly of how he has managed his compensation or the wisdom of such a large amount being paid as a lump sum and resulting in a preclusion period of nearly thirty years.
On behalf of the applicant it has been submitted that within six months he will be destitute. The Tribunal accepts this as an accurate projection based on the evidence before it. The Tribunal concludes that based on Mr Homewood’s current financial situation, which can be described as straitened, as well as his health needs and in particular that he is wheelchair bound and unable to even go on a waiting list to access appropriate housing, ‘special circumstances’ do exist.
The Tribunal therefore sets aside the decision under review and in substitution decides that so much of the compensation payment received by the applicant be treated as not having been made such that the preclusion period ends on 1 July 2006 instead of 18 October 2022.’
The Court noted that if the AAT added together all of the assets there was a total nominal value of $53,500.
Whether the Tribunal failed to give reasons for its decision in accordance with s.43 of the AAT Act
The Court stated that in order to exercise the power conferred by s.1184K of the Act, the AAT had to identify ‘special circumstances of the case’ in which it thought it ‘appropriate’ to treat the whole or part of the relevant compensation payment as not having been made. In giving its reasons for such a decision consistently with s.43, the AAT would be expected to:
1. Identify the circumstances of the case which it found to be ‘special’ and the reasons for which it arrived at that finding;
2. Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made;
3. Explain why it selected the particular quantum (i.e. the whole or part) of the compensation payment as not having been made.
Before the Court the Secretary accepted that the question whether a particular set of circumstances is ‘special’ is a question of fact. The AAT found Homewood’s reduced financial circumstances and his poor health amounted to ‘special circumstances’ and that finding was not challenged. The Court found that the reasons for decision properly set out the findings in support of that conclusion and the evidence on which it was based.
The Secretary’s case was that the AAT failed to give its reasons for disregarding so much of the compensation payment as would bring the preclusion period to an end on 1 July 2006. In submissions to the Court on behalf of the Secretary it was argued that the AAT in selecting that part of the compensation payment that should be disregarded for the purpose of calculating the preclusion period should have gone through an exercise of dividing the amount deemed to be then available to support Homewood by the income cut-out amount. The Court stated that such an argument would mean no more than that the AAT did not reason the way in which the Secretary thought it ought to have reasoned.
The Court noted that under s.43 of the AAT Act the primary obligation imposed on the AAT is to ‘give reasons ... for its decision’. They must include but are not limited to its findings on material questions of fact and reference to the evidence on which those findings are based. The Court referred to the statement of Sheppard J in Brackenreg v Comcare Australia [1995] FCA 1129; (1995) 56 FCR 335 (at 349):
Although the obligations to state the findings of fact and the evidence upon which those findings were based are related to the obligation to give reasons, they are independent and separate obligations.
The Court concluded that s.43 imposed an obligation that had three parts:
(i) to give reasons;
(ii) to include in its reasons its findings on material questions of fact;
(iii) to include in its reasons reference to the evidence or other material on which those findings are based.
It went on to say:
The obligations set out in s43 are not necessarily discharged by merely setting out findings on material questions of fact, referring to the evidence on which those findings are based and then stating a conclusion. There will always be some legal rule or principle or discretion to apply. ... the Tribunal will have discharged its duty under s43 if its reasons disclose its findings of fact, the evidence on which they were based and the logical process by which it moved from those findings to the result in the case.
Where a case involves the exercise of a discretion, what must appear from the reasons is why the discretion was exercised in the way it was.
The Secretary acknowledged that the Tribunal accepted, as an accurate projection, the submission that Homewood would be destitute within six months. The Secretary complained that the AAT did not explain why this was an accurate projection. The Secretary submitted that the AAT found that Homewood’s assets amounted to about $40,000-$50,000 and that this could not be reconciled with the selection of 1 July 2006 as the date for ending the preclusion period.
The Court did not accept this submission and noted that the discretion conferred by s.1184K of the Act is not confined to cases in which all or part of a compensation payment has been dissipated or lost. There may be cases giving rise to special circumstances in which it is appropriate to treat a payment in whole or in part as not having been made notwithstanding that it has not been lost.
The Court concluded that the AAT had made a finding of fact that within six months Homewood would be destitute. It had regard to his asset position. This finding was open to it. The complaint that it had not adequately disclosed its reasons for this conclusion was really a complaint about its findings of fact.
The Court found that the AAT’s finding formed a base for the exercise of the discretion under s.1184K(1) of the Act. The way in which the AAT approached the exercise of the discretion was adequately explained by reference to its finding of fact.
The Department’s application was dismissed with an order that it pay Homewood’s costs.
[C.E.]
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URL: http://www.austlii.edu.au/au/journals/SocSecRpr/2006/43.html