1093
■ A A T Decisions
Special circumstances
Section 1184 provides that all or part of
compensation payments may be disre­
garded in the special circumstances of
the case. In K r z y w a k (1988) 45 SSR
580 the AAT set out a number o f fac­
tors which could be taken into account
when deciding whether special circum­
stances existed. T h ese are financial
hardship, legislative change, incorrect
legal advice and ill-health. A further
facto r stated in V X Y (1993) 73 SSR
1054 was incorrect advice. (Legislative
change was not relevant in this matter.)
I ll health
Parezanovic explained that his disabili­
ty was getting w orse. He was taking
tablets every day and received medical
treatment as required. The AAT stated
that Parezanovic’s ill health was not
sufficient to find special circumstances
as m ost people in this situation were
suffering from ill health.
F in an cial h ardship
P a re z a n o v ic o w n e d h is ow n hom e
which he had bought prior to his com­
pensation settlement and since paid off.
He was currently looking for a block of
land to buy. He has 2 children aged 18
and 20 years living at home. His wife
did not work outside the home, staying
at hom e to care for him. Parezanovic
could not provide details o f his invest­
ments or income. The AAT referred to
the fact that Parezanovic owned a sub­
stantial asset and decided that he could
not be said to be suffering exceptional
financial hardship.
In co rre ct a d vice
P arezanovic com plained that he had
re c e iv e d in c o rre c t a d v ic e from his
solicitors and from the DSS. He said
the DSS had advised him that he would
continue to receive the pension after his
settlement but that his wife would not.
A letter from the DSS had advised that
h is p e n sio n w as n o t s u b je c t to the
income or assets test but did not refer to
a compensation paym ent
According to Parezanovic, his solici­
tors ad v ised th at h is pension w ould
continue after settlement based on the
le tte r o f ad v ice from the D SS. The
AAT noted that a number of AAT deci­
sions had decided that incorrect advice
fro m a p e r s o n ’s s o lic ito r d id n o t
a m o u n t to a s p e c ia l c irc u m s ta n c e
because the solicitor could be sued for
neglig en ce. F u rth erm o re, there was
insufficient evidence before the AAT to
find that Parezanovic had been given
incorrect advice by his solicitor.
N um ber 75 O cto b er 1993
The AAT referred to the decision of
K u la k o v (1991) 63 SSR 879 and noted
that, if a person had acted to their detri­
ment because o f incorrect advice given
by the DSS, then this could be special
circum stances. Parezanovic told the
AAT that if he had known that his pen­
sion would be cancelled, he would have
ask e d fo r m ore co m p en satio n . T he
AAT found that the DSS had not given
incorrect advice to Parezanovic, but
th a t it h ad d e la y e d a n sw e rin g h is
e n q u irie s w hen he w ro te an d te le ­
phoned. Also the DSS had not supplied
sufficient information about the effect
o f a c o m p e n sa tio n se ttle m e n t on
P a re z a n o v ic ’s in v alid p ension p a y ­
m ents. P arezanovic had acted to his
detriment because of this lack o f infor­
mation, and this was a special circum­
sta n c e . W hen th e A A T v iew ed
Parezanovic’s situation in its entirety, it
found special circum stances existed
and that recovery o f benefits paid for
the p e rio d 6 N o v em b er 1989 to 15
August 1991 should be waived.
F orm al decision
The A A T varied the decision as fol­
lows:
1. the preclusion period was reduced
because the lump sum compensation
paym ent was $1,079,243 and this
w as re d u c e d by the a m o u n t o f
$58,244 repaid to the insurer;
2. the recovery of benefits paid during
the lump sum preclusion period was
w aived because o f the special cir­
cumstances.
(E ditor’s note: Section 1184 states that
a paym ent o f com pensation m ay be
treated as not having been made in the
sp e c ia l c irc u m sta n c e s o f th e case.
S e c tio n 1237 p ro v id e s th a t the
Secretary to the DSS has a discretion to
waive the right of the Commonwealth
to recover a d eb t The AAT appears to
have confused these two sections.]
[C.H.]
Compensation
and social
security
payments
SE C R E T A R Y T O DSS an d
GRAHAM
(No. 8851)
D ecided: 22 July 1993 by B.H. Bums.
Timothy Graham received a payment
o f $30,000 in settlem ent o f a claim
a g a in s t h is e m p lo y e rs u n d e r the
W o rk e rs C o m p e n s a tio n a n d R e h a b i­
litation A c t 1986 (SA).
The DSS decided that Graham was
precluded from receiving pension by
s.1165 of the S o cia l S ecu rity A c t 1991
for a period o f 22 weeks.
On review, the SSAT decided that
the compensation part of the payment
received by the respondent was $1000
and reduced the preclusion period. The
DSS appealed to the AAT.
‘L um p sum ’
The SSAT had decided that only $1000
o f the com pensation paym ent was a
p ay m en t by w ay o f co m p en satio n ,
because the insurer who made the pay­
m ent to G raham had id entified that
amount as a payment under s.42 of the
W o rk e rs C o m p e n s a tio n a n d R e h a b i­
lita tio n A c t. That section provided for
the commutation o f weekly payments
by the paym ent o f a lump sum. The
balance of the $30,000 was paid under
other provisions of the A ct
The AAT noted that s.1165 o f the
S o c ia l S e c u r ity A c t only operated to
preclude paym ent o f pension when a
person had received compensation in
the form of a ‘lump sum’.
The AAT said that, in B an ks (1990)
20 ALD 19; 56 SSR 762, the Federal
Court had said that ‘a “lump sum” pay­
m ent is simply one which includes a
number of items’.
The paym ent to Graham answered
that description: it was not a series of
separate payments but a lump sum pay­
m ent consisting o f a num ber o f ele­
ments. It was a lump sum payment of
‘com pensation’, because it had been
‘w holly o r in p art in respect o f lost
earnings or lost capacity to earn ’, as
required by the definition of ‘compen­
sation’ in s.l7(2) of the 1991 Act: the
paym ent of $1000, an element in the
‘lump sum’, had been made in respect
of Graham’s incapacity for work.
S e c tio n 17(3) o f th e 1991 A ct
Background
1094
specifies that the compensation part of
a lum p sum paym ent is 50% o f any
payment made in settlement of a claim
related to disease or injury. The pay­
m e n t o f $ 3 0 ,0 0 0 m a d e to G rah am
answered that description and, accord­
ingly, the compensation part of the pay­
m ent w as $ 1 5 ,0 0 0 , n o t $ 1000. T he
preclusion period w as 26 w eeks, the
AAT decided.
‘Special circumstances’
The AAT then rejected a submission on
behalf o f Graham that there were ‘spe­
cial circumstances’ within s.1184 o f the
S o cia l Secu rity A c t , which would justi­
fy the AAT treating part o f the com ­
pensation payment as not having been
made.
T he ‘special circum stances’ w ere
said to be that only $1000 had been
received by Graham as compensation
for his loss o f earning capacity.
The AAT said that Graham had cho­
sen, for reasons which only he knew, to
opt out o f the State compensation sys­
tem. Section 1184 was ‘not intended to
be used to reward those who choose not
to fully pursue their lawful entitlement
to compensation’: Reasons, para. 24.
A reduced entitlement to compensa­
tion for lo st earning capacity m ight
a m o u n t to sp e c ia l c irc u m s ta n c e s ,
I
H ow ever, there w as no reason why
G ra h a m ’s c h o ic e , m ad e w h ils t in
receipt o f legal advice, to forego his
rights to com pensation should allow
him to receive social security when he
could have been receiving compensa­
tion payments.
Formal Decision
The AAT set aside the decision under
review and substituted a decision that
the compensation part of the lump sum
was 50% of $30,000 and the preclusion
p e rio d w as 26 w e e k s fro m 16
September 1991.
[P.H.]
r
Waiver of social
security debts:
where do we go
from here?
Introduction
On 3 June 1993 the Full Federal Court
handed down its decision in the matter
o f R id d e ll v S ecreta ry , D e p a rtm e n t o f
S o cia l S ecu rity (1993) 17 AAR 340. In
that decision, the court ruled that the
m inisterial d irectio n s governing the
Secretary’s discretion to w aive debts
u nder th e S o c ia l S e c u r it y A c t 1991
were not authorised by that Act. In so
doing, the court brought to an (arguably
fitting) end directions which had been
th e su b je c t o f c ritic ism sin c e th e ir
inception, initially as a creature of the
S o c ia l S e c u rity A c t 1947 in 1988. A
brief history o f the directions is set out
below, followed by a summary of the
court’s reasons for finding them to be
beyond authority.
Write-off and waiver of debts
Section 251 o f the S o c ia l S ecu rity A c t
1947 (the 1947 Act) gave the Secretary
o f the D epartm ent o f Social Security
the power to w rite-off or waive debts
owed by social welfare recipients to the
Com m onw ealth und er that Act. The
re le v a n t deb ts g e n e ra lly aro se as a
re su lt o f recip ien ts b ein g o v erp aid ,
whether as a result o f mistake or fraud
on the part o f the recipient or as a result
o f so-called ‘adm inistrative error’ on
the part o f the D epartm ent o f Social
Security (DSS).1 In O ctober o f 1988,
the S o c ia l S e c u r ity A m e n d m e n t B i ll
1988 was introduced. T hat B ill con­
tained proposed amendments to s.251
o f the 1947 Act, the effect o f w hich
were to allow the M inister for Social
S e c u rity to issu e d ire c tio n s to the
Secretary as to the exercise o f his or her
discretion to write-off or waive debts.
The effect of the am endments was to
make such guidelines formally binding
b o th on the S ecretary and also the
S o c ia l S e c u rity A p p e a ls T rib u n a l
(S S A T ) and th e A d m in is tra tiv e
Appeals Tribunal (AAT), should they
be required to review a decision by the
Secretary.
Though the directions w ere to be
tabled in the Parliam ent, the am end­
m e n ts m ad e no p ro v is io n fo r th e
Parliam ent to disallow the directions.
D espite suggestions from the Senate
Standing Committee for the Scrutiny of
B ills that, given their binding effect,
not only on the Secretary but also on
the SSAT and the AAT, the directions
should be disallowable,2 and in spite of
amendments to that effect moved in the
Senate by the A ustralian Dem ocrats,
the amendments to s.251 were passed
into law without any requirement that
the M inister’s directions be subject to
disallowance by the Parliament.3
In D e cem b er 1990, th e S o c i a l
S ecu rity B ill 1990 was introduced. This
Bill, which was the end result o f a con­
siderable period o f both drafting and
also consultation with interest groups,
was a ‘plain E nglish’ re-draft o f the
1947 A ct, in te n d e d to re p e a l and
replace the earlier A c t Clause 1237 of
the Bill essentially re-stated s.251 of
the 1947 Act (as amended), though the
u n c le a r c o n cep t o f ‘w rite -o ff’ w as
om itted. T he B ill was passed by the
P a rlia m e n t w ith o u t a m e n d m e n t to
C la u se 1237, b eco m in g th e S o c ia l
S ecu rity A c t 1991 (the 1991 Act) and
commencing on 1 July 1991.
Throughout this period, no direc­
tions pursuant to either s.251 o f the
1947 A ct or s.1237 o f the 1991 Act
were issued.
In June 1991, amendments to both
the 1947 and 1991 Acts were moved in
the Senate to m ake directions issued
pursuant to the relevant sections disal­
lowable instruments for the purposes of
S.46A of the A c ts I n te r p r e ta tio n A c t
1901. This had the effect of rendering
any directions subject to disallowance
by either House o f the Parliament, in a
similar manner to the way that regula­
tio n s are su b je c t to d isa llo w a n c e .
Consequently, when the Minister final­
ly issued directions (pursuant to s.1237
of the 1991 Act) on 8 July 1991, it was
open to either House of the Parliament
to d isallo w th o se d ire c tio n s. O n 6
N ovem ber 1991, Senator M eg Lees,
D ep u ty L e a d e r o f th e A u stra lia n
Democrats, moved in the Senate that
the d irectio n s be d isallo w ed .4 T h at
motion was not carried.5
The m inisterial directions of 8 July
1991
The ministerial directions issued on 8
July 1991 are prefaced by a statement
in the following terms:
Having regard to the importance of
recovering public moneys paid in excess
of entitlements authorised by Parliament,
the long-standing approach under the
Commonwealth Audit Act 1901 to the
recovery of debts, the obligations placed
on social security recipients by the
Social Security Act 1991 (the Act) to
notify changes in their circumstances
and the importance of deterring fraudu­
lent activity, and having regard to sub­
sections 1237(2) and (3) of the Act
which require the Secretary of the
Social Security Reporter