Secretary, Department Of Social Security v Hickman

(1996) 43 ALD 75

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(Decision by: Hallowes H E, SM)

Secretary, Department Of Social Security v
Stephen Hickman

Tribunal:

Member:
Hallowes H E, SM

Subject References:
SOCIAL SECURITY
disability support pension
compensation payment
preclusion period
whether to treat the whole or part of the compensation payment as not having been made
if circumstances special, factors relevant in determining what part of the compensation payment should be treated as not having been made?

Legislative References:
Social Security Act 1991 - 17(3); 1184

Case References:
Beadle v Director-General of Social Security - (1985) 60 ALR 225
Trimboli v Secretary, Department of Social Security - (1989) 86 ALR 64
Secretary, Department of Social Security v Thompson - (1994) 36 ALD 563
Re Beadle and Director-General of Social Security - (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services - (1981) 3 ALN N95
Re Zaccardi and Secretary, Department of Social Security - (1995) 40 ALD 760
Re Secretary, Department of Social Security and VYS - (1995) 40 ALD 745
Re Hajar and Secretary, Department of Social Security - (1988) 16 ALD 716

Hearing date: 21 June 1996
Decision date: 31 July 1996

Melbourne

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Decision by:
Hallowes H E, SM

1. This is an application by the Secretary, Department of Social Security ("the department") for review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 22 February 1996. The SSAT had reviewed a decision of an authorised review officer, who in turn had affirmed a decision of a delegate of the department rejecting Mr Hickman's claim for disability support pension on the ground that Mr Hickman was precluded from being paid disability support pension until 10 September 2001 as a result of his receipt of a lump sum compensation payment.

2. Mr Hickman claimed disability support pension on 15 August 1995. He advised that he had been awarded $325,000 compensation for brain damage, pain and suffering. Amongst the documents lodged with the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the documents") ("the AAT Act") was a copy of a letter to Mr Hickman from his solicitors, Slater and Gordon, dated 18 August 1995, advising that they were enclosing a cheque for $325,000.

3. The documents included a copy of the delegate's decision made on 18 August 1995 and the decision of the authorised review officer made on 14 December 1995 affirming the delegate's decision. The SSAT set aside the decision under review and remitted the matter to the Secretary for reconsideration in accordance with directions that, as special circumstances existed, part of the lump sum compensation payment was to be disregarded such that the preclusion period ended on 26 June 1996. The Secretary seeks a review of that decision.

4. The Secretary was represented at the hearing by Ms B Webb, a departmental officer, who provided the Tribunal with a written statement of the Secretary's case. Mr Hickman represented himself at the hearing with the assistance of his former partner, Mrs R Hickman.

5. The only issue for the Tribunal to determine is whether the whole or part of the compensation payment should be treated as not having been made under subsection 1184(1) of the Social Security Act 1991 ("the Act"). Subsection 1184(1) provides:

"1184(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."

6. The factual circumstances of the matter are not in dispute. On 25 August 1992 Mr Hickman suffered severe injuries in a motor vehicle accident. In a report dated 27 July 1995 his treating general practitioner, Dr P Coughlan, advised Mr Hickman's solicitors that Mr Hickman had the following "active problems":

"Frontal lobe damage;

Mood labile, depression;

Minor fitting despite medication;

Hearing loss;

Smell loss;

Urinary, sexual dysfunction;

Assorted subjective symptoms."

Mr Hickman told the Tribunal that he suffers from epilepsy and that he does not currently have a licence to drive a motor vehicle although he is hopeful that an adjustment to his medication, to be undertaken during hospitalisation in the near future, may ultimately mean that he is again able to drive a motor vehicle.

7. Mr and Mrs Hickman told the Tribunal that before Mr Hickman's motor vehicle accident they were living in rented premises with their two children who are now aged 14 and 15 years. In March 1994 they put a deposit on a house purchased in their joint names. When the sum of $325,000 was received from his solicitors on 18 September 1995 Mr Hickman placed the sum in their joint bank account although he had indicated, in lodging his claim for disability support pension on 15 August 1995, that he was separated. The separation details were confirmed by Mrs Hickman who stated that the date of separation was 4 August 1995. She noted that there had been problems in the marriage since Mr Hickman's accident. On 23 August 1995 Mr Hickman withdrew $140,000 from the joint bank account and opened his own bank account leaving Mrs Hickman with the balance of the lump sum compensation payment.

8. Mrs Hickman told the Tribunal that she used approximately $78,500 of the remaining sum in the joint bank account to pay off the home in which she lives with the children. In November 1995 Mrs Hickman closed the joint bank account and transferred the remaining money into her own bank account. She has expended a considerable amount of money on repairing the home in which she lives but it still requires a new roof which will cost approximately $12,000. She is working part-time to support the children and she receives no income support from the department as her family payments were cancelled and she has assumed, in light of the decision made with respect to Mr Hickman, that she has no entitlement to family payment. Mr and Mrs Hickman intend to obtain a divorce as soon as they have been separated for a 12 month period and the house which is still in their joint names, is to be transferred to Mrs Hickman's sole ownership. They have not formalised their financial arrangements at this stage in order to save costs.

9. Mr Hickman has used his share of the settlement monies to purchase a house and six acres of land at Callignee where he now lives approximately 18 kilometres from the closest town. The land cannot be subdivided. The house and land cost approximately $80,000. He has also bought a four-wheel drive motor vehicle for approximately $32,000, sundry other items and paid medical and pharmaceutical bills which are not paid by the Transport Accident Commission. He purchased a $5,000 bond for his children to be paid to them when they reach the age of 21 years and it appears from the evidence given by Mr J Hutchinson of the National Mutual Society before the SSAT that he has deposited $10,000 in a fixed term income trust fund for 18 months which can be withdrawn, although a penalty would ensue. He also has a life insurance policy to which he was contributing when he was working before his motor vehicle accident and into which he has now paid $25,000 by way of a lump sum. The policy will mature when he reaches 65 years of age. At the date of the hearing before the SSAT Mr Hickman had $38.31 remaining in his bank account. When he appeared before the Tribunal he still only had a very small sum of money available to him.

10. Mrs Hickman told the Tribunal that she has been paying Mr Hickman's accounts and giving him small sums of money for his weekly expenses. He has also received some financial assistance from his father and his brother but this is difficult for them as his father is on a pension and his brother has just been retrenched from his job. Mrs Hickman continues to help Mr Hickman as much as she can and she is concerned as to how he will live in the future, particularly if he is forced to sell his home. He enjoys being on his own in the bush and, in her opinion, he has been happier since he has been living alone on the farm. The children spend one or two nights a week with their father at the farm. Mr Hickman acknowledged the support he has received from Mrs Hickman since his accident and he spoke of the difficulties he has faced in coping with his circumstances.

11. Ms Webb put to the Tribunal that the policy behind the relevant legislation is that people in receipt of compensation payments should use the compensation payments for living expenses rather than having the benefit of the public purse to support a life style. Ms Webb contended that it would be inappropriate for the Tribunal to exercise the discretion under subsection 1184(1) of the Act as, in the applicant's opinion, Mr Hickman's circumstances are not unusual, uncommon or exceptional. She stated that Mr Hickman was put on notice by the department on 8 August 1995 that he would not be entitled to a disability support pension until the year 2001. She conceded that Mr Hickman suffers severe health problems but she noted that he has significant assets available to him including his fixed term deposit with the National Mutual Society and an interest in his former matrimonial home occupied by Mrs Hickman and their children. Ms Webb also questioned Mr Hickman's ownership of a motor vehicle when he is unable to drive. In that context Mr Hickman put to Ms Webb that he cannot "...give up hope".

12. The meaning of "special circumstances" has been considered by the Tribunal in many applications. In Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 the Tribunal said with respect to the then relevant section, section 115 of the Social Services Act 1947, at page N97:

"...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."

The Federal Court in Beadle v Director- General of Social Security (1985) 60 ALR 225 at page 230 said that it was in broad agreement with the approach of the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 where the Tribunal said at page 3:

"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."

13. The occasions when circumstances are special will vary with the facts of each matter (Trimboli v Secretary, Department of Social Security (1989) 86 ALR 64 at page 73) and circumstances not specifically related to a particular portion of compensation payments are relevant, such as the mental health and social conditioning of an individual (Secretary, Department of Social Security v Thompson (1994) 36 ALD 563 at page 568). As in Re Zaccardi and Secretary, Department of Social Security (1995) 40 ALD 760, this family have had to adjust to very different circumstances following Mr Hickman's motor vehicle accident. Mr Hickman's understanding of the application of the legislation to his circumstances, and the consequences of decisions made by him on his entitlement to be paid disability support pension, make it difficult to determine the preferable decision in this matter.

14. On discharge from the Bethesda Hospital in November 1992 it was reported that Mr Hickman could only manage simple structured and familiar tasks if he did them slowly. He was easily distracted and impulsive. In July 1995 Dr Coughlan reported that Mr Hickman was suffering hearing loss with tinnitus and temperomandibular joint "clicking noises" in his head. He suffers permanent loss of smell and unpleasant olfactory hallucinations. He wets himself at night and has erectile impairment. He is clinically depressed.

15. All Mr Hickman seeks in lodging his application for review is enough money to pay for his food and electricity. Although he was advised by the department of the effect of the provisions of the Act on his lump sum compensation payment the Tribunal is satisfied that, as a result of his head injury, he was not in a position to establish a financial plan when he received his lump sum payment, which would enable him to pay for his daily living expenses until September 2001. As the SSAT said in its reasons for decision, he is vulnerable in protecting his financial interests. He also understood, as a result of comments made by his solicitor, that he would be entitled to a disability support pension. Ms Webb put to the Tribunal that misleading advice is not a special circumstance under subsection 1184(1). The Tribunal notes what was said by Mrs Dwyer, Senior Member, in Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745 at paragraphs 35 to 38 inclusive of her reasons for decision on this issue:

"(35)

During the hearing Mr Carson relied on Re Venables and Secretary, Department of Social Security (1988) 15 ALD 180 as authority for the view that incorrect legal advice cannot constitute a special circumstance for the purpose of s 1184 of the Act. I pointed out to him that in both Re Krzywak and Re Secretary, Department of Social Security and VXY (1993) 30 ALD 681 I had expressed some reservations about relying on that decision, saying in VXY, at para 54:

With respect we agree with the tribunal in Re Venables that the lack of knowledge is the relevant factor, but we would add that in these days of severe limits on the availability of legal aid, it may be unrealistic to expect applicants for disability support pension or similar payments from the department, to commence proceedings against their solicitors. Perhaps it might be a good idea if more did so. That might encourage those practising in compensation and personal injury areas to ensure that they keep up with amendments to the social security legislation. In the meantime, if the problem continues, perhaps the department may consider arranging for an eye-catching but brief notice alerting people to the existence of lump sum preclusion periods to be displayed in a number of languages in public areas and waiting rooms at premises where compensation and other personal injury claims are heard and decided.

(36)

I also suggested to Mr Carson that it was probable that since the full court of the Federal Court decided Comcare v A'Hearn (1993) 119 ALR 85; 18 AAR 366, Re Venables should no longer be regarded as establishing that the relationship between an applicant and his solicitor was not to be regarded as a special circumstance. Mr Carson submitted that in Re Napolitano and Secretary, Department of Social Security (1994) 36 ALD 187 which was decided after Comcare v A'Hearn, Deputy President McDonald had followed Re Venables, saying at para 9, after setting out the evidence as to Mr Napolitano's advice from his solicitors:

It will be seen from the above that the issues which are raised are not ones which can or should be dealt with by the secretary of the department, or the tribunal standing in the secretary's shoes, as a special circumstance case. They are, in the view of the tribunal, more appropriately dealt with in another forum and this was pointed out to Mr Napolitano at the hearing.

It does not appear that the tribunal in Re Napolitano was asked to consider whether Comcare v A'Hearn had any bearing on the issue of solicitor's negligence as a special circumstance.

(37)

The full court in Comcare v A'Hearn held that it was an error of law for the Tribunal to hold that inexcusable delay on the part of solicitors could not constitute an acceptable explanation for delay in making an application within time. The full court said, at ALR 88; AAR 369:

`A consistent thread thus revealed in the reasoning is that the tribunal considered that delays by a solicitor were to be visited upon a client. Thus, despite the inexcusable delay on the solicitors' part that the tribunal found, it was able to say that there was, 'no acceptable explanation whatsoever' for the delay. This approach cannot stand in the light of modern authorities such as Jess v Scott (1986) 12 FCR 187; see also Lighthouse Philatelics Pty Ltd v Commissioner of Taxation (1991) 32 FCR 148 at 156.

(38)

If delay on the part of a solicitor is not necessarily `to be visited upon a client' whose only remedy would be action against the solicitor, but may constitute `an acceptable explanation for delay', it would seem that incorrect advice from a solicitor may, in an appropriate matter, constitute an acceptable special circumstance within the meaning of that term in s 1184 of the Act. That is a more realistic response than one which requires an impecunious client to commence action against a solicitor or else suffer the consequences."

The Tribunal concurs with Mrs Dwyer's comments but observes that if a person has misunderstood the provisions of the Act with respect to compensation payments it does not necessarily follow that, if he or she received correct advice, a larger compensation payment would have been paid. Neither is it always clear on the evidence before a Tribunal whether advice has been misleading or merely misunderstood.

16. Mr Hickman has been mindful of his future and that of his children and he has expressed his appreciation for the support still given to him by his former partner who has, in effect, lost the partner she knew. Mrs Hickman has a home for their children and a reasonable expectation that the Family Court may declare that she has a right to Mr Hickman's share of the home. It is a home, if circumstances had been different, she may have expected to own with Mr Hickman, paid for out of his wages. Mr Hickman has his own home and he has put by some of his compensation payment for his retirement. However, he has placed himself in a difficult position because he has no cash flow. The Tribunal is not satisfied that this application is on all fours with the circumstances in Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 where the applicant was a joint owner of a family home although separated from his wife. In that matter the applicant wished to sell the home and he was making no contribution to the support of his wife and children. He claimed unemployment benefits rather than disability support pension and he lived with his brother who housed and fed him.

17. There are a range of factors in this application which taken together satisfy the Tribunal that there are special circumstances which make it appropriate to treat part of the compensation payment as not having been made. The matter is markedly different from the usual run of cases. The circumstances which are special in this matter include the severe nature of the injuries suffered by Mr Hickman and the impact of those injuries on his life, including the effect on his relationship with his former partner and on his responsibility for his children. The Tribunal is satisfied that those factors, taken with the isolation Mr Hickman needs to give him some emotional stability, make this application unusual. There is a need for separate households in this matter and some encouragement should be given to Mr Hickman so that he maintains a positive outlook on life for his own and his childrens' sakes.

18. It depends on the circumstances of each case whether a claimant should exercise a right to pursue a possible entitlement to a financial interest in a former matrimonial home. In this matter Mr Hickman has an interest in his childrens' emotional security and their well-being as well as his own. It is important for him to continue to have the assistance of his former partner, rather than placing her financial situation in jeopardy. The Tribunal notes Ms Webb's advice that the former matrimonial home was paid for entirely out of the compensation payment and that, if Mrs Hickman was to move to rented premises she would be entitled to rent assistance. It is inappropriate for a system of social security to require people, through misfortune, to take "a one way ticket to poverty" (Secretary, Department of Social Security and VYS). It is also inappropriate to make a decision which would destroy a person's chance of rehabilitation, albeit, any rehabilitation may not go far towards giving a person back what they have lost. Despite Mr Hickman's expressed desire to work again, the Tribunal is not optimistic about his chances of earning any income in the future, nor about his chance of saving for his retirement. In reaching its decision the Tribunal has also taken into account that Mr Hickman must meet some of his medical expenses which are not paid for by the Transport Accident Commission. On the other hand, there are sound reasons for Mr Hickman to use some of his available funds to support himself now rather than in his retirement. The policy behind the relevant provisions of the Act should be applied to reach a practical and reasonable outcome in this matter. In determining what part of the compensation payment should be treated as not having been made it is appropriate to consider the amount of compensation paid to a claimant, the period during which payment of a pension may be precluded and the special circumstances which have occurred.

19. Ms Webb contended that, if the Tribunal found that special circumstances existed, the Tribunal should take into account the present rate of disability support pension in order to determine when the preclusion period should end, rather than the average weekly earnings applied in this application by the SSAT in paragraph 45 of its reasons for decision. The SSAT said:

"Applying the formula in section 1165(4) of the Act, and dividing the $10,000.00 less 1% by average weekly earnings of $547.60, the Tribunal decided that so much of the lump sum settlement as is necessary should be disregarded, such that the preclusion period will end on 26 June 1996, the resultant number of weeks of preclusion ending on that date."

Alternatively Ms Webb suggested that the Tribunal take into account the weekly living expenses of a claimant. In affirming the decision under review in Secretary, Department of Social Security and VYS , the Tribunal said that reducing the preclusion period by 52 weeks at a cost to the taxpayer of approximately $14,000, achieved a balance between the compensation recovery policy of the Act and Mr VYS's psychiatric and emotional needs.

20. It is the special circumstances of each case which determine the part of the compensation payment to be taken as not having been made rather than the financial needs of a claimant. The relevant provisions of the Act then apply to the remaining part of the compensation payment to determine the preclusion period. The fact that a person may have a very reduced life-style as a result of a minimal cash flow or because he or she must rely on the generosity of friends, or the fact that they have an ability to support themselves to some extent through home produce, should not be factors which determine the amount of compensation to be treated as not having been made. That would place an inappropriate burden on family and friends. It may also place family and friends in an invidious financial situation and close off not only an avenue of financial support, but also emotional support if too many demands were to be made by a recipient of a compensation payment. In deciding what part of the compensation payment to treat as not having been made, it is appropriate for the Tribunal to consider the applicant's needs which would otherwise not have been met unless he expended part of his lump sum payment to fulfil those needs.

21. Taking into account Mr Hickman's very severe medical conditions and the effect of those medical conditions on his relationships with his former spouse and his children, the importance of those relationships for him, the difficulties he faces in managing his finances, his financial circumstances, and the need for him to see some light at the end of the tunnel, the Tribunal has decided to treat $250,000 of the compensation payment as not having been made. This amount reflects sums paid by Mr Hickman for housing for himself and his children and should ensure his ongoing support of his children through looking after them for part of the week and their ongoing security at other times with his former spouse. It also reflects Mr Hickman's need to meet some medical and travel costs and will enable him to move about his property in a vehicle capable of being driven off the road.

22. The release dated 4 August 1995 provides that a sum of $350,000 be paid to Mr Hickman. Treating $250,000 of this sum as not having been paid, $100,000 remains of which 50 percent is the compensation part under subsection 17(3) of the Act. The sum of $50,000 should be divided by $547.60, the relevant average weekly earnings to arrive at the preclusion period which commenced on 1 August 1995.

23. It is for these reasons that the decision under review will be set aside and the matter remitted with directions to the Secretary of the Department of Social Security.