Editors --- "Compensations preclusion period: special circumstances; gambling" [2009] SocSecRpr 19; (2009) 11(2) Social Security Reporter, Article 8

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Compensations preclusion period: special circumstances; gambling

SHINWARI and SECRETARY TO THE DFHCSIA

(2009/317)

Decided: 6th May 2009 by N. Isenberg

Background

Shinwari was on newstart allowance and was injured in a motor vehicle accident in 2000. Personal injury proceedings were settled in November 2007 for $50,000, inclusive of costs. Centrelink was paid a compensation charge of $6326.70.

Shinwari was paid $38,183.30, which he deposited into his bank in January 2008. He withdrew $38,000.00 in cash the next day from two different branches of the bank, which he gambled and lost

at poker machines over the next 10 days.

Shinwari said that he had started gambling on poker machines about 2003, spending whatever he could. He accrued credit card debts totalling about $15,000, mostly due to gambling. In 2006, after losing about $350 in one session, he sought assistance form Wesley Mission Gambling Counselling Services. The counsellor destroyed his credit cards and negotiated a repayment schedule for his credit card debts. He said he saw the counsellor every 2-3 months and a letter was provided from the counsellor noting five attendances between December 2006 and May 2008, four of those being before Shinwari was paid compensation. A further letter referred to Shinwari as not having gambled in the previous four months. Shinwari’s evidence was that he last gambled in January 2009 after he had last seen the counsellor.

Shinwari told the Tribunal that his onlydebt was the credit card debt. He, his wife and their nine children, aged between 2 and 20 years, lived in government housing and he received disability support pension and an education supplement. His wife received carer payment, family tax benefit and parenting payment. After the fortnightly credit card repayments, he used the balance to pay household expenses. The Centrelink payments were the family’s only source of income.

Shinwari told the Tribunal he was depressed because of his situation. A letter from his general practitioner noted depression as well as Hepatitis C, discogenic lower back pain, diabetes, poor concentration, poor memory and unstable mood and that he was under the care of a psychologist, however Shinwari denied being under psychological or psychiatric care.

The Tribunal accepted as fact that all the money was spent on gambling over a short period of time.

Considerations and the law

The scheme of the legislation is aimed at preventing those receiving lump sum compensation payments for loss of income from also receiving Centrelink benefits. Where the lump sum settlement includes a component of economic loss, Part 3.14 of the Social Security Act 1991 (the Act) has the effect that 50% of the lump sum is taken to be for lost earnings or lost capacity to earn. This amount is the ‘compensation part of the lump sum’ and is then used, by application of a statutory formula, to calculate a period of time when a person will not be eligible to receive Centrelink payments (the preclusion period). If, during the preclusion period, the person has received Centrelink payments, then the Act creates a statutory charge over the settlement funds totalling the amount of payments made. The licensed insurer is obliged to pay the amount of the charge to Centrelink in priority to payments to the person entitled to the benefit of the settlement.

The Act provides potential relief from the strict application of the compensation provisions, by allowing discretion to disregard the whole or part of the compensation payment in ‘special circumstances’ (s.1184K(1)).

There was no dispute that if the statutory formula was applied to Shinwari’s circumstances, a preclusion period of 32 weeks would apply and that the charge amount relating to this period totalled $6326.70.

The Tribunal considered whether there were any ‘special circumstances’ in Shinwari’s case to reduce the length of the preclusion period in order to repay to him some or all of the compensation charge.

The Tribunal noted a number of cases where gambling was contended as amounting to special circumstances. In Males and Secretary, Department of Family and Community Services [1999] AATA 863; (1999) 57 ALD 793, the Tribunal exercised the discretion to disregard some of the compensation lump sum on the basis of the combined impact of Males’ behaviour, described as ‘out of control’ when gambling, and an absence of any realisable assets that could be used to maintain himself. Other decisions, however have taken a contrary view, distinguishing between a gambling addiction (as a psychological/psychiatric condition) and a lifestyle choice: for example, Davis and Department of Family and Community Services [1999] AATA 84 where there was no evidence that the applicant was addicted to gambling or drinking, and that Davis’ behaviour could only be described as ‘grossly irresponsible’. In Stavrakis and Secretary, Department of Family and Community Services [2003] AATA 212; (2003) 73 ALD 432, the Tribunal expressly referred to the diagnosti criteria for pathological gambling in the Diagnostic Statistical Manual volume lV and concluded that the diagnostic criteria had not been met. However, in Secretary, Department of Family and Community Services and Pearce [2003] AATA 972; (2003) 78 ALD 771, the Tribunal accepted Pearce’s gambling was not a lifestyle or personal choice but ‘something in the form of an addiction and having pathological consequences’ despite the lack of medical or specialist evidence. Other cases considered gambling as only one of the factors to be considered.

In this matter, Shinwari could not identify other aspects of his circumstances that might make his situation special; his only contention was that he had gambled all the money and had done so in a very short space of time. His wife separated their accounts so that the family’s livelihood was not further jeopardised. The Tribunal considered that for a man with nine children, he had acted very irresponsibly. He had previously had some counselling, but had not been referred for psychological or psychiatric treatment for an addiction. Even though all the money was gone by mid-February 2008, he did not attend counselling again until May 2008, 12 months after his last session. In the later letter, the counsellor wrote that she understood him not to have gambled in the four months to November 2008. This was not the case, as he had gambled since that time. In the absence of him receiving psychological or psychiatric intervention, the Tribunal did not accept that he had an addiction to gambling. It said that he had money and took the opportunity to spend it as he saw fit.

The Tribunal found that the application of the formula contained in s.1170 of the Act did not produce an unfair, unjust or unintended outcome, that Shinwari’s circumstances were not ‘special circumstances’ for the purposes of s.1184K and that none of his compensation payment should be treated as not having been made.

Formal decision

The Tribunal affirmed the decision under review.