Editors --- "Compensation: lump sum preclusion; special circumstances" [2009] SocSecRpr 49; (2009) 11(4) Social Security Reporter, Article 12

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Compensation: lump sum preclusion; special circumstances

O’NEILL and SECRETARY TO THE DEEWR

(2009/619)

Decided: 21st August 2009 by N. Isenberg

Background

On 19 March 2003 O’Neill was injured in a motor vehicle accident. On 20 October 2006 he was awarded $463,325 in compensation including $334,455 for past and future economic loss.

On 21 November 2006 Centrelink determined O’Neill was subject to a preclusion period from 15 March 2005 to 7 May 2012. By February 2008 he had no money left and he contacted Centrelink to enquire about claiming disability support pension (DSP). He applied for DSP in December 2008. His claim was refused by Centrelink because of the preclusion period. That decision was affirmed on internal review and by the Social Security Appeals Tribunal (SSAT) on 12 April 2009. O’Neill applied to the Tribunal for a review of the decision.

Issue

The only issue was whether there were any special circumstances warranting the reduction in the length of the preclusion period in accordance with s.1184K(1) of the Social Security Act 1991 (the Act).

Legislation

Part 3.14 of the Act provides for the effect of compensation on certain social security benefits.

Section 1169(1) of the Act provides in effect that a compensation affected payment (which includes DSP) is not payable during a lump sum preclusion period.

Section 1184K(1) of the Act authorises the Secretary (and the Tribunal standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment if it thinks it appropriate to do so in the special circumstances of the case.

Evidence

O’Neill gave evidence to the Tribunal about the accident and the impact on him of the injuries he suffered. He continued to experience severe pain and having unsuccessfully tried several treatments he had been referred to a pain clinic. He was prescribed narcotic pain killers that could produce side effects and were addictive. Since the accident he had developed sciatica, arthritis and high blood pressure and had required $9000 of dental work.

O’Neill gave evidence that he did not understand the advice his solicitors gave him about the preclusion period (although he knew the money had to last him until 2012). His compensation payments had been erratic and he had been forced to borrow large sums of money from friends and family to meet basic needs. As a result he was estranged from his family and his friends.

He was angry at his condition and frustrated with his financial situation. He had planned to get advice about investing his money but had not followed through with this.

He began to drink heavily to deal with his pain. He smoked marijuana for 1½ years after the accident in an attempt at pain relief but found it ‘isolating’. He started gambling as a means of ‘switching off’. He spent up to $1000 per day at the club drinking and gambling. He denied that he had gambled to excess prior to receiving the compensation money.

He spent about $19,700 on household goods and $1300 on air-conditioning.

O’Neill spent $20,000 of his lump sum on a car and $13,000 on a motorcycle. He used $10,000 to purchase a car for his father and spent $5000 on presents for his nephews and nieces. He repaid some of the money he had borrowed. He travelled around New South Wales and Queensland with a friend.

At the time of the hearing he gave the following evidence about his situation:

• He had no money left and at least $170,000 of the compensation money was unaccounted for.

• He was $1900 behind in his rent and was at risk of eviction.

• He had sold all his assets so as to avoid immediate eviction and had no plans as to what he would do if he was evicted.

• He had received charity assistance to pay for his electricity.

• He had debts.

• He owned a mobile phone but had no credit.

• He had lost a significant amount of weight and rarely drank because he could not afford it. He had a health care card. For several months he went without medication because he could not afford to have the prescription dispensed. His pharmaceutical bills with the health care card were about $300 per month.

• He had received no financial counselling.

• He felt guilty for having spent all the money and was clearly distressed during the hearing.

Consideration

The Tribunal noted that the aim of the legislative scheme was to prevent people who received lump sum compensation for loss of income from then receiving benefits from the ‘public purse’. His preclusion period was correctly calculated.

The Secretary submitted that there were no special circumstances.

The Tribunal noted that special circumstances did not have to be statistically ‘extreme’ or ‘unique’; it was sufficient if there was something that took the matter out of the usual ordinary case.

The Tribunal noted that O’Neill received no financial advice; he had limited understanding of financial matters and was ill-equipped to manage his funds for a period of 7 years. It accepted his evidence about his anxiety during the litigation process and noted that he had, and continued to have, significant problems adjusting to his pain and the limitation upon his functioning. The Tribunal noted that he had new medical conditions which had come about since the compensation payment, which required expensive medication that he could not afford in the absence of Centrelink support.

The Tribunal disagreed with the view of the SSAT that O’Neill had not explored all possible work opportunities nor pursued all options for financial assistance. The Tribunal noted that he had been assessed by a job capacity assessor in July 2009 and found to qualify for DSP. He was estranged from his family and friends. He had received some financial assistance from a charity but needed further assistance to avoid eviction.

The Tribunal noted that financial hardship might be grounds for finding special circumstances and considered that O’Neill’s financial situation was dire. He had sold everything he owned in an attempt to alleviate his financial situation.

The issue was whether his circumstances could be said to be special when he was responsible for them. He was aware that the money had to last until 2012 but spent it all in about 6 months.

The Tribunal noted that he had lost much of his money gambling and referred to Martin and Secretary, Department of Social Security [1990] AATA 768; Marsh and Secretary Department of Family and Community Services [2004] AATA 228 where it was held that where expenditure has been sufficiently extravagant or unwise as to be unreasonable, it has not been found to constitute special circumstances:

The Tribunal noted that if the preclusion period was shortened because of his reckless spending others in similar circumstances could be encouraged to do likewise increasing dependence on the public purse. However as O’Neill was destitute, unable to work and with no other support the Tribunal’s dilemma was to decide where the burden of supporting him should fall: the taxpayer or charity? The Tribunal considered that while charities could have a role in providing ‘one-off’ type payments such as assistance with an electricity bill it was not their role to totally support someone for a period of years.

After evaluating his financial, health and family situation the Tribunal came to the view that when considered together, his circumstances possessed that particular quality of unusualness that permitted them to be described as special and therefore part of his compensation payment should be treated as not having been made.

Formal decision

The decision under review was set aside and the Tribunal substituted a decision that the preclusion period ended on the date of its decision.

[C.E.]