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Social Security Reporter |
Disability support pension debt: whether regular payments from Medical Trust Fund were income; special circumstances waiver
(2010/242)
Decided: 31st March 2010 by R.J. Groom
O’Neill was injured in a work-related motor vehicle accident in 1985. He suffered a serious brain injury which resulted in permanent mental incapacity. In February 1987, O’Neill was granted a disability support pension (DSP) which he continued to receive after his workers’ compensation claim was settled in 1994. There were two components to the settlement:
$130,000 plus costs paid by the insurers to settle his claim for incapacity and lost earnings which was administered by the Tasmanian Public Trustee (the ‘Personal Trust Fund’) and $1.2 million which was also paid by the insurers in settlement of O’Neill’s past and future ‘accommodation, services, nursing care and therapy’ costs. After satisfying outstanding accounts for hospital, medical and ambulance services the balance of $870,000 was paid to the Public Trustee subject to the terms of a deed of settlement dated 20 July 1994 and also the provisions of the Public Trust Office Act (Tas) 1932 (the Medical Trust Fund).
The terms of the Deed provided for a regular payment, on a monthly basis for a defined and limited purpose being for O’Neill’s ‘.... Full accommodation, services, nursing care and therapy.’ Under the Deed the monies could not be used for any other purpose and provided for the return of any residue to the insurance company on O’Neill’s death. Further the State of Tasmania was a party to the Deed and made a number of covenants including that if and when the Medical Trust Fund was exhausted it was then to provide for O’Neill’s ongoing accommodation, nursing, medical and related needs.
In accordance with the Deed, regular payments were first made to the hospital where O’Neill was being cared for and then to a Nursing Home. On 19 May 2008, Centrelink decided that these regular payments made out of the Medical Trust Fund for O’Neill’s hospital and nursing care were payments of income for the purposes of assessing his entitlement to DSP under the Social Security Act 1991 (the Act). This resulted in O’Neill’s DSP being cancelled on 20 May 2002 and a debt of $123,816 being raised against him for the period 1 December 1994 to13 May 2008. The Public Trustee on behalf of O’Neill sought review of these decisions.
The principal issues to be determined by the Tribunal were:
Were the regular payments from the Medical Trust Fund for O’Neill’s hospital and nursing care ‘income’ for the purposes of the Act?
If those payments were income should any overpayment of the pension be recovered?
The principal provisions of the Act requiring consideration by the Tribunal were as follows:
8(1) In this Act, unless the contrary intention appears:
Income, in relation to a person, means:
(a) an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b) a periodical payment by way of gift or allowance; or
(c) a periodical benefit by way of gift or allowance...
Income amount means:
(a) valuable consideration; or
(b) personal earnings; or
(c) moneys; or profits;
(whether of a capital nature or not)
Section 8(2) defines the expression ‘earned, derived or received’ as follows:
(2) A reference in this Act to an income amount earned, derived or received is a reference to:
(a) an income amount earned, derived or received by any means; and
(b) an income amount earned, derived or received from any source (whether within or outside Australia).
Section 8(8) contained a list of various types of payments and benefits which are excluded from the concept of income for the purposes of the Act.
Section 8(8)(v) provides:
‘A payment (other than a periodical payment or a payment representing an accumulation of instalments) made for or in respect of expenses incurred by a person for hospital, medical, dental or similar treatment.’
Section 8(8)(zi) provides:
‘A payment towards the cost of personal care support services for the person, being a payment made under a scheme approved under section 35A;’
Section 35A provides:
‘35A Personal Care Support
The Minister may, in writing, determine that a scheme for the provision of personal care support is an approved scheme for the purposes of this Act’
Section 1237AAD of the Act sets out the requirements for debt waiver on the basis of special circumstances.
For O’Neill it was argued that the only payment that should properly be considered was the lump sum payment of $870,000 paid into the Medical Trust Fund administrated by the Public Trustee . It was argued that this was a lump sum payment of O’Neill’s hospital and nursing care and was therefore an excluded amount under s.8(8)(v) of the Act.
The contention was that the $870,000 was paid into the Medical Trust fund only because of O’Neill’s mental incapacity and that if he had been able to manage his own affairs the lump sum would have been paid directly to him and any subsequent payments he made out of the lump sum for his hospital and nursing care would not in any sense have been considered income. Whilst the Tribunal commented that there may be some merit to this contention, it found that it was likely that the lump sum would then have been treated as an asset and any income derived from the lump sum when invested would be considered income for the purposes of the Act.
The Tribunal observed that there had been two stages in the settlement of O’Neill’s workers compensation claim. The first stage was the two lump sum payments made by the insurers to satisfy the claim with the second stage of the process being the series of regular payments which commenced in late 1994 and were still ongoing and which were paid out of the Medical Trust Fund for O’Neill’s hospital, nursing care and related expenses.
The Tribunal considered the definition of income. It commented that the definition had been cast in very wide terms to restrict social security payments to people genuinely in need. It went on to note that the extraordinary wide range of exclusions set out in s.8(8) of the Act highlighted the breadth of the meaning of income.
On further examination of the character of the regular payments made out of the Medical Trust Fund the Tribunal found that the payments were a periodic benefit by way of allowance and therefore income to be taken into account when assessing O’Neill’s entitlement to DSP. In so doing, the Tribunal was satisfied that the payments were periodical in the sense that they were paid regularly and on a monthly basis. In considering whether the payments could be regarded as an allowance it relied on the Macquarie Dictionary (5th Edition) adopting its ordinary meaning. It noted that the Macquarie Dictionary defined allowance as ‘a definite sum of money allotted or granted to meet expenses or requirements’. It concluded that the payments made to the hospital and nursing home were of a definite sum of money allotted to meet O’Neill’s expenses and requirements. It disagreed with the submission advanced on behalf of O’Neill that the allowance must have the character of an ex-gratia payment. The Tribunal held that whilst an allowance may include payments of a gratuitous kind it was not confined to ex-gratia payments in the strict sense of the term. The Tribunal decided that the payments in question were also a ‘benefit’. The Tribunal held that the benefit provided through the payment to the hospital and the nursing home was in the form of the provision of full accommodation, nursing and medical care and other essential services.
In arriving at the conclusion that the payments were ‘periodic payments’ and ‘periodic benefits’ by way of allowance pursuant to ss.8(1)(b) and (c) of the Act, the Tribunal decided that it was not necessary to express any view as to whether the payments were ‘an income amount earned, derived or received by the person for the person’s own use or benefit’ (section 8(1)(a)). However it did refer to the brief discussion at the hearing about the possibility of an application under s.35A of the Act and opined that the ‘approval of such an application might well be consistent with the policy behind section 35A and section 8(8)(zi) of the Act’ (Reasons, para. 51).
The Tribunal considered the meaning of ‘special circumstances’ by reference to case law. It held that O’Neill’s legal representatives and officers in the office of Public Trustee had acted properly in every respect and had no intention to conceal the information. Further the Tribunal was satisfied that there was contact with the Department of Social Security prior to settlement and that it was aware of the existence of the Consent Judgment and draft Deed. Given that there was no evidence as to whether or not the matter set out in the Deed had been properly considered by the Department, the Tribunal opined that it could only speculate about the Department’s then attitude to the payment.
The Tribunal found that O’Neill’s circumstances were special in regards to him being a completely innocent party totally dependent on the people who advise and assist him and the serious impact that recovery action might potentially have on his future enjoyment of life and well being. The Tribunal calculated that recovery of the overpayment would reduce the balance of the Fund from $197,393.70 to $73,577.60. Taking into account O’Neill was aged 48, the evidence that his life expectancy was not likely to be significantly affected by his severe mental and physical incapacity and that it was likely that he would remain dependent on his Personal Trust Fund for the payment of personal expenses for many years to come, the Tribunal found that the significant depletion of the only source of personal funds available to him in circumstances where he had played no conscious part in the events which caused the overpayment amounted to unusual and exceptional circumstances. The Tribunal therefore decided to exercise its discretion in section 1237AAD of the Act to waive all the debt of $123,816.10.
The Tribunal affirmed the decision to cancel O’Neill’s DSP; set aside the decision to raise and recover the debt of $123,816.10 and pursuant to s. 1237AAD of the Act waived the right to recover any part of the debt.
[G.B.]
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URL: http://www.austlii.edu.au/au/journals/SocSecRpr/2010/25.html