Alavanja and Secretary, Department of Families, Housing, Community Services and Indigenous Affair & Anor

[2010] AATA 675

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 675

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  2010/2495

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		BORISLAV ALAVANJA

Applicant

AndSECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondents

DECISION

Tribunal Mr John Handley, Senior Member  

Date7 September 2010

PlaceMelbourne

Decision The decisions made by the Social Security Appeals Tribunal on 28 May 2007 and 5 May 2010 are affirmed.

(sgd) John Handley

Senior Member

SOCIAL SECURITY ‑ newstart allowance – carer payment – compensation ‑ compensation preclusion period – debt raised by Centrelink – whether compensation includes legal costs and disbursements –– remitted to decision-maker with recommendations – original decision affirmed on remittal ‑ whether remitted under s 42D or s 43 – review by SSAT – absent jurisdiction – resumption of review by AAT – decision affirmed.

Administrative Appeals Tribunal Act 1975 (Cth) s 42B, 42D, s 42D(1), s 42D(2), s 42D(8), s 43 and s 43(1)

Social Security Act 1991 (Cth) s 17(2), s 17(3), s 1171 and s 1184K

Attorney‑General v Wentworth (1988) 14 NSWLR 481

Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152

REASONS FOR DECISION

7 September 2010   Mr John Handley, Senior Member  

1. This matter was listed for Directions Hearing on 17 August 2010. Mr De Uray, on behalf of the respondent, submitted that the application should be dismissed pursuant to s 42B of the Administrative Appeals Tribunal Act 1975 (the AAT Act). He contended that the current application is obviously untenable or manifestly groundless (refer Attorney‑General v Wentworth (1988) 14 NSWLR 481 at 491). Mr Alavanja (the applicant) appeared without representation. He has ceased to instruct the solicitor who previously acted for him.

2.        The application has an unusual history and can be summarised briefly as follows.

3.        The applicant applied to review a decision made by the Social Security Appeals Tribunal (SSAT) in AAT proceedings 2007/3057.  The SSAT then reviewed a decision made by an Authorised Review Officer (ARO) on 6 December 2006.  The application was heard on 15 February 2008 and in a written decision with reasons delivered by me on 10 April 2008, I remitted the application to Centrelink for reconsideration in accordance with my reasons.  A copy of that decision is appended to these reasons (Annexure 1).

4.        On 26 May 2008 an officer of Centrelink decided to affirm the decision made on 6 December 2006 and in a letter dated 30 June 2008 advised the applicant that the decision is in accord with current policy and no further changes are to be made (T5).  The solicitor who was then representing the applicant sought reconsideration.  In a letter dated 1 October 2008, another Centrelink officer concluded the decision was correct and should not be changed (T9).

5.        The applicant sought reconsideration (again) of that decision.  On 24 October 2008, an ARO decided to affirm the decision of 26 May 2008 (T12).

6.        On 15 February 2010, the applicant applied to the SSAT for a review of the decision made by the ARO of 24 October 2008.  On 5 May 2010, the SSAT decided that it did not have jurisdiction to decide the matter.

7.        The applicant applied to this Tribunal for a review of that decision on 18 June 2010.  The application was listed for a Directions Hearing on 17 August 2010 and these reasons have been delivered following the discussions on that occasion.

DECISION IN APPLICATION Nº 2007/3057

8.        I delivered a decision on 10 April 2008 following a review of a decision made by Centrelink on 6 September 2006 to impose a compensation preclusion period and to raise and recover debts of $23,318.79 and $2816.04 arising out of social security benefits paid to the applicant.

9.        Centrelink made the decisions, referred to above, following the recovery of damages by the applicant when he resolved two common law proceedings issued in the County Court of Victoria.  One claim arose under the Wrongs Act 1958 (Vic) (Wrongs Act) following the death of his late wife and the other application concerned a claim by him for damages.

10. The application brought under the Wrongs Act was settled in the sum of $100,000 and $20,000 for costs and disbursements. The other application was settled in the sum of $60,000 and $20,000 for costs and disbursements.

11.      Prior to the resolution of the common law claims, the applicant had received newstart allowance and carer payment.  Centrelink decided to calculate and impose a compensation preclusion period from 2 November 2002 to 30 July 2005.  This meant that the applicant was not entitled to receive a compensation affected payment during that time (s 1169 of the Social Security Act 1991 (the Act)).  The applicant received carer payment between 2002 and 2003.  He also received newstart allowance between 2003 and 2005.  These payments were received during the period in which the preclusion period applied.  Centrelink therefore decided to raise a debt for the overpayment in accordance with s 1184A of the Act. 

12.      Centrelink treated the two lump sum payments received by the applicant as a single lump sum payment on the basis that the two payments were made in relation to the same event (s 1171 of the Act).  Centrelink also found that the applicant did not have special circumstances which permitted it to treat the whole or part of the compensation payment as not having been made or not liable to be made pursuant to s 1184K of the Act.

13.      In calculating the preclusion period, Centrelink had regard to the aggregate sum of $200,000.  It regarded that sum as compensation as defined in s 17(2) of the Act and the damages paid were regarded as lump sum compensation for the purposes of s 17(3) of the Act.  Centrelink applied the 50% formula, also found at s 17(3) of the Act, to calculate the preclusion period.

14.      In the Reasons for Decision that I delivered, I expressed concern as to what appeared to be the unintended consequences to the applicant of deeming a single lump sum payment.  There is no need for me to repeat the observations that I recorded in the earlier decision save that I refer to paragraphs 11 – 20 inclusive.

15. I concluded that as a matter of law, I was obliged to find that s 1171 of the Act had been properly applied. The two separate payments were made in relation to the same event and therefore, were deemed a single payment which was the basis for calculating the compensation charge.

16.      I was also concerned that Centrelink regarded the payments of costs and disbursements as compensation for the purposes of s 17(2) and (3) of the Act.

17.      I referred to decisions previously made by the Tribunal and the Federal Court where payments of costs had been regarded as compensation.  I drew attention to a decision of the President of this Tribunal, Mr Justice Downes,      in Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152. His Honour recommended that Centrelink reconsider the way in which it makes the preclusion period calculation because of the unfairness that… results between litigants, having regard to the manner in which terms of settlement are expressed.  Nonetheless, His Honour decided, in comity, to follow the previous decisions of the Federal Court.

18.      Of course I was obliged to follow previous decisions.  I am bound to follow those decisions and I acknowledged my obligation to do so.  However, I did want to again, draw attention to what I regarded to be the unfairness of regarding costs as compensation when calculating the compensation lump sum payment for the purposes of calculating a preclusion period.  I will not repeat the comments that I made in the previous decision, save that they are found at paragraphs 21 – 28, inclusive.

19.      The remaining issue was whether the applicant was able to demonstrate special circumstances.  I found that special circumstances could not be demonstrated (refer paragraphs 29 – 30, inclusive).

20.      I eventually decided to remit the application to Centrelink to reconsider its calculation of the preclusion period.  I urged it to have regard to the exceptional nature of the application before it and to the circumstances which gave rise to the common law proceedings issued by the applicant.  I also asked Centrelink to reconsider its position with respect to taking into account the payment of costs and disbursements when calculating the lump sum compensation payment and the period of preclusion.

21.      In anticipation that Centrelink would reconsider its calculations, I decided that the decision under review is remitted to Centrelink for reconsideration in accordance with these reasons.

22. I did not refer to either s 42D or s 43 of the AAT Act in making that decision.

23.      The SSAT in its Reasons for Decision on 5 May 2010 decided by its interpretation of my decision that the remission of the application to Centrelink for reconsideration was made under s 42D of the AAT Act.

24. I did not affirm, vary or set aside the decision under review within the meaning of s 43(1) of the AAT Act. My decision of 10 April 2008 should be regarded as a decision remitted pursuant to s 42D(1) of the AAT Act.

25. Section 42D of the AAT Act provides that at any stage of a proceeding for a review of a decision the Tribunal may remit the decision for reconsideration. The decision that is remitted is the decision of an ARO. The history of this application indicates that the decision intended to be remitted was the decision of the ARO made on 6 December 2006. On 24 October 2008 an ARO reconsidered the remitted decision and affirmed it pursuant to s 42D(2) of the AAT Act (refer to paragraphs 4-6, inclusive).

26.      In those circumstances, the decision affirmed on reconsideration causes the proceeding to resume (refer s 42D(8) of the AAT Act). Accordingly, when the ARO made the decision of 24 October 2008 the Tribunal should have been notified and the hearing in application Nº 2007/3057 should have resumed. It did not because notification was not given to the Registrar.

27.      The SSAT was correct, in my view, to make the finding that it did on 5 May 2010 that the review sought of it by the applicant had no warrant because the AAT proceedings should have resumed.

CONCLUSION

28.      I decided at the end of the Directions Hearing that it was appropriate that these proceedings be brought to an end by the Hearing being resumed.

29. I was invited during the Directions Hearing to make findings implicit in my previous decision and conclude the proceedings by making a decision under s 43 of the AAT Act.

30.      In my Decision of 10 April 2008 I found as a matter of law that both payments of damages were deemed a single lump sum and compensation included the legal costs when assessing the lump sum compensation payment for the purpose of calculating the preclusion period.  I was also satisfied that the applicant’s circumstances were not special to allow me to exercise the discretion s 1184 of the Act.  It follows that the reviewable decision is affirmed.

31.      I am disappointed that the Centrelink Customer Service Officer and the ARO affirmed the decision on the basis that it was consistent with current policy.  Both disregarded His Honour's conclusion and observations in Re Fuller.  .

32. The application by Mr De Uray to have the current application dismissed under s 42D of the AAT Act is harsh. The applicant had no choice but to institute the proceedings that he did in the absence of the Hearing before the Tribunal being resumed in the manner contemplated by s 42D(8) of the AAT Act.

33.      Having regard to all of the circumstances, including the Decision of 10 April 2008, the decision made by the SSAT under review in application Nº 2007/3057 is affirmed.   

34.      It also follows for all of the above reasons that the decision made by the SSAT in application Nº 2010/2495 is also affirmed.

I certify that the thirty-four [34] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr John Handley, Senior Member

Signed:          Olympia Sarrinikolaou

Legal Assistant

Date of Directions Hearing          17 August 2010
Date of Decision  7 September 2010
Advocate for the Applicant          Self-represented
Advocate for the Respondent       Mr T. De Uray, Centrelink Legal Services Branch

ANNEXURE 1

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 286

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  2007/3057

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		BORISLAV ALAVANJA

Applicant

And

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondents

DECISION

Tribunal Mr John Handley, Senior Member

Date10 April 2008

PlaceMelbourne

Decision The decision under review is remitted to Centrelink for reconsideration in accordance with these reasons.

(Sgd)  John Handley
  Senior Member

SOCIAL SECURITY – applicant initiated proceedings personally to recover damages for his personal injuries and separate proceedings as a representative of the Estate of his wife for loss of dependency – both proceedings settled – two payments made to applicant – settlement also included payment of costs – Centrelink aggregated both payments (including costs) and calculated a compensation charge – discussion of whether consequences intended when the Estate claim did not conclude by a lump sum compensation payment – finding that special circumstances did not exist – remission to Centrelink to reconsider whether legal costs should be brought into account consistent with decision in Re Fuller.

Mental Health Act 1986 (Vic)

Social Security Act 1991 (Cth) s 17 (2), s 17 (3), s 1169 (1), s 1171 (1) and s 1184K (1)

Wrongs Act 1958 (Vic)

Administrative Appeals Tribunal Act 1975 (Cth) s 43
Family and Community Services Legislation (Simplification and Other Measures) Act (no 71 of 2001)

Fuller and Secretary, Department of Family and Community Services [2004] AATA 615

Secretary, Department of Social Security v A'Beckett (1990) FCA 332

Secretary, Department of Social Security v Banks (1990) 23 FCR 416

Groth v Secretary, Department of Social Security [1995] FCA 1708

REASONS FOR DECISION

10 April 2008   Mr John Handley, Senior Member

35.     Review of decisions made under the Social Security legislation often involve consequences unintended or not envisaged when the legislation was drafted or subsequently amended.  Those consequences often cause hardship.  The provisions under the Social Security Act 1991 (the Act) which will be discussed in these reasons, if strictly applied, will cause hardship which I am sure the Parliament did not intend.  For reasons which will hopefully become obvious I have decided to remit this matter to the decision‑maker for reconsideration.

36.     The applicant is the widower of the late Vera Alavanja who attempted suicide when she was an involuntary patient pursuant to the Victorian Mental Health Act 1986 (the Mental Health Act) of the Dandenong Psychiatric Centre. Mrs Alavanja was subsequently placed on life support but which was subsequently withdrawn on 17 November 2002 by an Order of the Victorian Civil and Administrative Appeals Tribunal.

37.     The applicant subsequently instituted proceedings in the County Court of Victoria claiming damages on his own behalf with respect to injuries and economic loss suffered by him and damages on behalf of the Estate of Mrs Alavanja pursuant to the Victorian Wrongs Act 1958 (the Wrongs Act).

38.     At all relevant times the applicant was legally represented.  The proceedings were subsequently settled by a Deed of Release in the total sum of $200,000 inclusive of legal costs apportioned as follows:

·     The applicant's claim in his own right for personal injuries and economic loss at $60,000 and $20,000 for costs and disbursements.

· The applicant's claim as a representative of the deceased's Estate pursuant to the Wrongs Act in the sum of $100,000 and $20,000 for costs and disbursements.

39.     Prior to the resolution of the County Court claims, Centrelink paid Carer Allowance (CA) and Newstart Allowance (NA) to the applicant.  When Centrelink learnt of the resolution it decided to impose a preclusion period.  By application of the formula at s 17 (3) of the Act the period expired before the date of resolution.  Accordingly Centrelink decided to impose recoverable charges with respect to the benefits paid in the period 3 November 2002 to 30 July 2005 being a total of $26,134.83.  The imposition of those charges is the decision under review in these proceedings.

the legislation

40. Relevantly s 17 (2), s 17 (3), s 1169 (1), s 1171 (1), s 1184K (1).

17  Compensation recovery definitions

(2)Subject to subsection (2B), for the purposes of this Act, compensation means: 

(a)a payment of damages; or 

(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or 

(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or 

(d)any other compensation or damages payment; 

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

(3)Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is: 

(a)50% of the payment if the following circumstances apply: 

(i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and 

(ii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or 

(ab)50% of the payment if the following circumstances apply: 

(i)the payment represents that part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and

(ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and 

(iii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or 

(b)if those circumstances do not apply—so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn, or both.

1169    Compensation affected payment not payable during lump sum preclusion period 

(1)       If: 

(a)a person receives or claims a compensation affected payment; and 

(b)the person receives a lump sum compensation payment; 

the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period. 

1171  Deemed lump sum payment arising from separate payments 

(1)       If: 

(a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and 

(b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn; 

the following paragraphs have effect for the purposes of this Act and the Administration Act: 

(c)the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments; 

(d)the single payment is taken to have been received by the person: 

(i)      on the day on which he or she received the last of the multiple payments; or 

(ii)     if the multiple payments were all received on the same day, on that day.

1184K  Secretary may disregard some payments 

(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. 

conclusion and reasons for decision

41.     Counsel for both parties lodged written submissions prior to the commencement of the hearing and also made oral submissions at the hearing.  Both acknowledged that this was an unusual application which had the potential to cause consequences which were probably not foreseen when the legislation was drafted.

42.     As may be seen from the legislation recited above, compensation is a payment of damages or a payment under a scheme of insurance whether paid as a lump sum or periodically, made wholly or partly in respect of lost earnings or lost capacity to earn, resulting from personal injury. I understand that provision to mean that a person who recovers compensation, by reason of lost earnings or lost capacity to earn, because of personal injury that they have suffered, will be subject to the force of the legislation. However, the payment of damages to the applicant with respect to the Wrongs Act proceedings is not compensation as defined. The payment of damages under the Wrongs Act is in respect of lost dependency by reason of the death of the person upon whom a plaintiff was economically dependent. I am not satisfied therefore that a payment of damages under the Wrongs Act is compensation.

43.     Additionally, the provisions of s 17 (3) of the Act apply only in respect of a payment made in settlement of a claim in whole or part arising out of a disease, injury or condition – which must necessarily be a disease, injury or condition of the plaintiff.  For the reasons expressed above a payment for lost dependency, is not compensation and for the purposes of s 17 (2) of the Act and it cannot be the compensation part of a lump sum compensation payment.

44. But for the provisions of s 1171 (refer later), s 1169 would not have been invoked if the applicant had recovered compensation only with respect to the Wrongs Act claim. Section 1169 imposes a preclusion from receipt of social security benefits if a compensation affected payment and a lump sum compensation payment is received. The applicant did receive a compensation affected payment.  A CA is such a payment (refer s 17) and a NA is such a payment because it is defined as a social security benefit by the combined effect of both s 17 and s 23 of the Act. However the Wrongs Act payment, again for reasons expressed above, is not a lump sum compensation payment. For the purposes of this and other sections where the expression lump sum is expressed, I note that the Federal Court in Secretary, Department of Social Security v Banks (1990) 23 FCR 416 decided that a lump sum was a payment which included a number of items which although capable of being paid separately and at different times have been aggregated into a single payment.  I am therefore satisfied that the payments of damages received by the applicant do constitute a lump sum.

45. Section 1171 of the Act has the consequences which seem to me to be unfortunate and in need of review. This section provides that where a person receives two or more lump sum payments arising out of the same event which gave rise to the entitlement to compensation and at least one of the payments is made wholly or partly in respect of loss capacity to earn or lost earnings, the person shall be deemed to have received one lump sum compensation payment being the sum of both payments.  Because both payments are deemed to be a single payment of lump sum compensation, the provisions of s 17 (3) are attracted and a lump sum preclusion period has been imposed.

46. I think that if s 1171 (1) (b) of the Act did not appear in its present form, the consequences which the applicant will endure by this review would probably not occur because I think ss (a) could be interpreted as meaning that the receipt of the two lump sum payments in relation to the same event must each be in the nature of compensation as defined by s 17 (2).  However ss (b) recites that for the purposes of aggregating both payments only one need be a payment made wholly or partly in respect of lost earnings or lost capacity to earn.

47. Mr Keogh properly conceded that the payment ($60,000) paid to the applicant with respect to the claim made by him for pain and suffering and lost capacity to earn would be subject to the preclusion period. But for the reasons I have expressed above, I think that that payment, together with the payment made with respect to the recovery of damages from the Wrongs Act proceeding, must both be aggregated and the resultant sum will be caught by the provisions of s 1171 (1) (c) and consequently will be subject to the formula which determines the duration of the preclusion period.

48. Centrelink is satisfied that a Wrongs Act payment is not subject to the preclusion period regime. In a letter to the applicant's solicitors of 16 December 2005 (T5, p42) it confirmed that departmental policy did not regard such payments as being compensation.  Relevant extracts of Centrelink policy at Chapters 1.1.C.240 and 4.13.1.20 record that payments excluded as compensation are payments made under State and Territory Compensation to Relatives and Legislation and Death Benefits.  That policy is clearly correct because such payments are not made wholly or partly in respect of lost earnings or lost capacity to earn.

49. Mr Keogh raised examples of the unintended consequences of s 1171 to highlight the inequitable application of the section. For example, if a person driving a motor vehicle is involved in a collision where personal injury is suffered and damage is also occasioned to the vehicle, and the person recovers monies in separate proceedings from a scheme of insurance for lost earnings (in whole or part) and from a private insurer with respect to the costs of repairs to the vehicle, both payments will be aggregated and will attract the preclusion period provisions, despite only one of those two payments being paid by reason of the person's lost capacity to earn.

50. Section 1171 does refer to lump sum payments in relation to the same event.  Those words also attracted some discussion at the hearing.  For the purposes of this application and to give effect to the meaning of the words as they appear, I am satisfied that the same event is the event which gives rise to the making of both applications.  For the purposes of these proceedings, that event is the death of the applicant's wife.

51. Section 1171 was introduced to the Act by way of amendment under the Family and Community Services Legislation (Simplification and Other Measures) Act (no 71 of 2001) and is described in the Explanatory Memorandum as a replacement for s 17 (2B) as previously existing.  A number of Members of the House of Representatives spoke in favour of the Bill but their attention was focussed on the ease of calculating a preclusion period where a person receives lump sum payments or periodic compensation payments.  References were not made to the consequences of aggregating two or more payments where one of the payments was not made wholly or partly in respect of lost earnings or lost capacity to earn.

52. Historically it would appear that s 17 (2B) which was previously expressed in similar terms to s 1171 arose out of a number of decisions before the Federal Court and this Tribunal where the same event gave rise to a payment in respect of personal injuries and a payment in respect of economic loss (refer Secretary, Department of Social Security v A'Beckett (1990) FCA 332).

53.     I am satisfied on balance that the legislation in its present form operates to aggregate both payments made to the applicant because they are both in the nature of a lump sum, they both arise out of the same event and one of those two payments was made wholly or partly in respect of lost earnings or lost capacity to earn.  When both those payments are aggregated, the resultant sum does attract the provisions with respect to calculating the preclusion period found at s 17 (3) of the Act.

54.     I do not wish to labour the point but I am sure that the Parliament would not have intended – if it had been considered – that a payment made which was not compensation as defined – and no less being a payment made to a person who instituted proceedings and who claimed damages in the circumstances of the applicant.  That is, where the claim did not allege a personal injury or a loss of earning capacity.

55.     The issue of legal costs paid in these proceedings was also the subject of considerable submissions from both parties.

56.     Of the total sum of $200,000 paid in settlement of both proceedings, $40,000 ($20,000 in each application) was paid with respect to the applicant's costs and disbursements.  Regard was had to the total sum of $200,000 in calculating the preclusion period.

57.     Regard for legal costs in compensation settlements as if such payments were to be embraced by the expression lump sum compensation payment has been the subject of many decisions in the Federal Court and in this Tribunal.  His Honour, Downes J, the President of this Tribunal, referred extensively to those decisions in Fuller and Secretary, Department of Family and Community Services [2004] AATA 615. His Honour decided in comity with the previous decisions to follow them (refer decision at paragraph 22).

58.     However, His Honour did discuss the manner in which costs could be paid in settlement of proceedings and the consequent regard for the basis of settlement in regard to the consequent identification of the lump sum compensation payment when calculating the preclusion period.  His Honour noted that an application may be settled either for an award of damages plus a specific amount of costs, or, for an amount of damages inclusive of costs or, for an amount of damages plus costs to be determined.  It would appear from the evidence before His Honour that in the event of the latter circumstance, the respondent excludes costs when calculating the lump sum preclusion period.  That is, if costs are not defined or regarded as being inclusive of the award of damages but are to be subject of subsequent negotiation or taxation of a bill of costs, only the amount which was paid as damages for personal injury or lost earning capacity or both, is the amount over which the preclusion period is calculated.  His Honour discussed the apparent unfairness to other applicants who have not had the benefit of terms of settlement where costs have not been agreed, in his consideration of the special circumstances provisions found at s 1184K.  His Honour concluded (paragraph 27) I do not see any reason why in a case in which an agreed sum of costs is a genuine assessment of those costs, the applicant should not be treated in the same way as an applicant who is a party to a settlement where costs are to be subsequently agreed or assessed.

59.     Rather than make a decision excluding the payment of costs to the applicant which were fixed and determined by the Tribunal – His Honour decided to remit the matter to the respondent for reconsideration.  His Honour decided at paragraph 28:

While I have found against the applicant on the legal issues raised in this case, it does seem to me appropriate that the respondent should reconsider the way in which it makes the preclusion period calculation and to do so taking into account the unfairness that it seems to me to result from the decision under review.

His Honour was reluctant to substitute his own decision under s 43 of the Administrative Appeals Tribunal Act 1975 in the absence of argument by the parties and because there may have been matters of which he was not aware when the sum of costs was calculated.

60.     I respectfully adopt and agree with His Honour's sentiments and conclusions.

61.     It seems to me that if an amount of money is paid to an applicant or a plaintiff which is clearly identified as a payment of the costs incurred in the proceedings, such costs are not of themselves a payment of compensation or a lump sum compensation payment within the meaning of s 17 (2) or (3).  I also acknowledge – and am bound by – the previous decisions made by the Federal Court on this issue.

62.     It is for the above reasons that I am satisfied that the respondent should reconsider its decision to have regard to the sum of $40,000 paid with respect to the applicant's costs in both proceedings when calculating the amount over which the preclusion period should be determined.

63.     Another matter over which there was little discussion at the hearing but which featured in the submissions made by the applicant's solicitors to the Social Security Appeals Tribunal – in pursuing an application under s 1184K – was an allegation of incorrect advice given by Centrelink. The applicant's Solicitor sought advice, prior to settlement, of whether any preclusion period would be imposed by giving estimates of amounts which may be recovered. It appears that Centrelink understood that the advice sought by the applicant's solicitors was with respect only to the claim for loss of dependency (refer letter of Centrelink at T5, p42) and it advised that a preclusion period would not be imposed over a payment made in settlement of a Wrongs Act claim. Centrelink was not advised, nor did it understand, that the applicant was also claiming damages for personal injury and for loss of earning capacity suffered by him. Had Centrelink been aware of such an application and an estimate of the amount that may have been recovered in those proceedings, an advice would have been given by Centrelink that that sum – at least – and probably by the provisions of s 1171 – both sums – when aggregated – would have been the basis for calculating the lump sum preclusion period. I am not satisfied for the above reasons that there was incorrect advice given by Centrelink and accordingly I am not satisfied that there is any basis with respect to this issue which would attract the special circumstances provisions of s 1184.

conclusion

64.     In Groth v Secretary, Department of Social Security [1995] FCA 1708, (Groth) Her Honour Kiefel J, considered whether special circumstances existed in the case of an injured worker, in impecunious circumstances where, by reason of the date of injury did not enjoy the benefits of a higher rate of weekly compensation when legislation was subsequently amended and who was also affected by amendments to the Social Security Act.  Her Honour decided, having considered a number of other decisions (at paragraph 13) . . . the difficulty in which Mr Groth is placed results from the level of pension set by the legislation and not because it has special consequences for him.  Application of the law, however harsh or unfair, consistent with Groth is not a special circumstance and I can find nothing from these proceedings which would permit the discretion available under s 1184K being exercised.

65.     For all of the above reasons I am satisfied as a matter of law that the decision under review in large part should be affirmed but the component of the aggregated sums described in the Deed of Release as having been paid as costs and disbursements should be reconsidered by Centrelink, for the reasons expressed above.

66. I am bound as a matter of law to determine that both sums paid to the applicant as damages, that is, the sum of $100,000 with respect to the Wrongs Act application and the sum of $60,000 paid to the applicant in the proceedings initiated by him for his personal injuries and his loss of earning capacity must also, pursuant to s 1171 be aggregated and over which regard should be had in calculating the preclusion period.

67. I remit this application to Centrelink to reconsider the basis for determining the preclusion period / compensation charge and to consider whether, either as an Act of Grace payment or by some other mechanism, in the exercise of its welfare obligations it will continue to calculate the lump sum preclusion period by regard to the sum paid to the applicant in the Wrongs Act proceedings when that payment, clearly of itself, was not a payment under the Act which was compensation or a lump sum compensation payment. Both proceedings were not initiated, nor were separate sums paid in settlement, to create a fiction attempting to avoid the imposition of a preclusion period. Sentiments of that type were expressed by some Members of the Parliament when supporting the legislation which introduced s 1171 of the Act.

68.     For the reasons expressed earlier I would also recommend that Centrelink reconsider its decision to have regard to legal costs when calculating the lump sum compensation payment.

I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of:
Mr John Handley, Senior Member

Signed:         Grace Carney, Personal Assistant

Date of Hearing  15 February 2008
Date of Decision  10 April 2008
Counsel for the Applicant         Mr A J Keogh
Solicitor for the Applicant          Drakulic Lawyers
Departmental Advocate            Mr T de Uray