Attard and Secretary, Department of Families, Community Services and Indigenous Affairs

[2007] AATA 1935

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1935

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/3547

GENERAL ADMINISTRATIVE DIVISION		)
Re		TONY WALTER ATTARD

Applicant

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

Respondent

DECISION

Tribunal Regina Perton, Member

Date9 November 2007

PlaceMelbourne

Decision The Tribunal sets aside the decision under review and substitutes a decision that the whole of the compensation payment arising out from the compensation affected payment dated 1 February 2006 is to be treated as not having been made on the basis of special circumstances. 

Regina Perton

Member

SOCIAL SECURITY ‑ lump sum compensation – arrears of weekly compensation - preclusion period – special circumstances – decision set aside.

Social Security Act 1991 ss 17(1), (2), (3), 7(8), 1170, 1184, 1184K

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866

REASONS FOR DECISION

9 November 2007 Regina Perton, Member    

1.      Mr Tony Attard sought workers’ compensation after perceived ill-treatment in his workplace affected his health.  In the meantime, Centrelink, which administers Newstart allowance (NSA) for the Secretary of the Department of Families, Communities and Indigenous Affairs (the Secretary) paid Mr Attard NSA, as his position had been terminated.  Eventually, he received a lump sum from his employer’s insurer. 

2.      On 8 February 2006, Centrelink made a decision to seek repayment of the NSA payments received by Mr Attard between 9 July 2004 and 6 January 2006.  Centrelink sought repayment by way of reimbursement from the insurer. On 9 February 2006, the insurers reimbursed Centrelink $15,660.06 out of the lump sum paid to Mr Attard. 

3.      Mr Attard believes that the payment made to him was not a compensation affected payment.  He argues that he did not receive a workers’ compensation payment but rather an ex-gratia payment, which should not have resulted in Centrelink’s reimbursement.

4.      On 4 June 2007, an authorised review officer of Centrelink (ARO) affirmed the original decision of 8 February 2006.  On 20 July 2007, the Social Security Appeals Tribunal (SSAT) also affirmed the decision   Mr Attard lodged an application for review of the SSAT decision with this Tribunal on 20 July 2007.

5.      The major issue before the Tribunal is whether the lump sum paid to Mr Attard is a compensation affected payment.   If it is, the Tribunal needs to consider if all or part of the amount claimed by Centrelink should be waived due to special circumstances.

Was the lump sum payment a compensation affected payment?

6. Section 17(1) of the Social Security Act 1991 (the Act) provides that a compensation affected payment includes NSA. Section 17(2) of the Act provides:

17(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.

7.      On 1 February 2006, Mr Attard signed a Deed of Release, the text of which states, among other things, that:

…

B.  The Releasor has lodged a Workcover claim against the Releasee seeking compensation pursuant to the Accident Compensation Act 1985 (Vic) (“the Act”) in respect of psychiatric injury allegedly arsing out of or in the course of his employment with the Releasee (“the claim”)

…

F.  For the sole purpose of avoiding litigation and costs the Releasor and the Releasee have agreed to a settlement of:

(a) The claim

…

(c) Any and all rights or entitlements the Releasor has, or may have had, or may have in the future pursuant to the Administrative Law Act 1978 (Vic), the Supreme Court Rules or at common law or in equity to appeal or seek judicial review of the opinion of the medical panel….

G.  The settlement contained in this Deed may create a liability in the Releasor or the Releasee to pay amounts pursuant to the …Social Security Act 1991 (Cth)…

AND THE RELEASOR AGREES THAT:

1.  The Releasee promises to pay and the Releasor accepts the Releasee’s promise to pay:

(a) Weekly payments of compensation under the Act at the appropriate rate for a worker with no current capacity for the period 9 July 2004 to 8 January 2006;

…

8.      The Deed of Release is a document awarding Mr Attard a lump sum following his lodgement of a claim for compensation.  Mr Attard told the Tribunal that he was pressured to sign the document on the basis that the insurance company did not have the paperwork that would allow it to pay him an ex-gratia payment.  Mr Attard stated that his claim against the medical panel’s decision that he was not eligible for workers compensation had been dismissed in the Magistrates’ Court in late December 2005.  He said that the medical panel’s decision was made despite evidence from other psychiatrists clearly linking his condition to his former workplace.   Mr Attard said that he had not yet lodged a claim in the Supreme Court at the time of the settlement.  He believes the lump sum was an ex-gratia settlement to avoid judicial scrutiny of the medical panel’s decision.  He said that weekly payment dates were only specified to suit the insurance company’s paperwork.   

9. However, regardless of the circumstances in which Mr Attard signed the document, the payment meets the criteria in s 17(2) of the Act. The Tribunal finds that the lump sum paid to Mr Attard is a compensation affected payment. 

The Compensation Preclusion Period

10. Mr Attard was paid a lump sum of $53,844.60. Under s 17(3) of the Act, 50 per cent of a lump sum settlement payment is held to be the compensation part of the payment. Section 1169 of the Act provides that NSA is not payable during a preclusion period. Section 1170 of the Act sets out the method of calculating a compensation preclusion period.  Section 1170(1)(b) provides that the length of the preclusion period is calculated by dividing the compensation part of the lump sum payment by the income cut-out amount (s 1170(4) and (5)).  Income cut-out amount is defined in s17(1), according to a complex formula set out in s17(8). The calculations have been undertaken electronically by Centrelink. In the absence of any evidence to the contrary, the Tribunal is satisfied that Centrelink has correctly calculated the preclusion period, namely from 9 July 2004 to 6 January 2006. Centrelink records indicate that the amount paid to Mr Attard during that period was $15,660.66.

11. Section 1184 of the Act allows the Commonwealth to seek the recoverable amount directly from the compensation payer.  Centrelink recovered the $15,660.66 directly from CGU Insurance. 

Special Circumstances

12. Section 1184K(1) of the Act gives the decision‑maker discretion to treat the whole or part of a compensation payment as not having been made or not liable to be made, if the decision‑maker thinks it is appropriate to do so in the special circumstances of the case.  The meaning of the term special circumstances in the context of social security law has been discussed in several Federal Court cases and a multitude of Tribunal cases.  In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J considered the term in the context of s 1237AAD of the Act. Besanko J refers extensively to Ryde v Secretary, Department of Family and Community Services [2005] FCA 866, where Branson J held that the use of the term special circumstances in the legislation demonstrated an intention to proscribe waiver in ordinary cases.  Branson J went on to state that the hardship or unfairness should be sufficient to justify departure from the general rule in the particular case.

13.     In Angelakos, Besanko J states (at paragraph 33):

…I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances…It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case, there must be something that distinguishes the case from the ordinary or usual case…

14.     Mr Attard has raised his financial, emotional and health circumstances, and the circumstances in which the Deed of Release was signed as pertinent matters for the Tribunal to consider as special circumstances. 

15.     Of the lump sum payment, after the payment to Centrelink of $15,660.06 and a withholding of $10,830.80 in tax, a net amount of $27,353.14 remained.   Mr Attard gave evidence that all but $7,000 of the net amount was spent on legal fees and repaying debts he had at that time.  That $7,000 has now been spent and he still has significant debts.  He provided a statement of his financial circumstances as at 3 October 2007.  This showed that his outstanding liabilities included car registration ($575.40) and debts to four companies, Lion Finance ($9,000), Money 3 ($1,450), City Finance ($1,034) and Needy Money ($250).  He provided documents to the Tribunal verifying the liabilities he had.  He also detailed personal debts totalling over $12,000 to friends and family.   He said that he also has around $2,800 in parking infringements which he attributed to his lack of concentration and ill-health.  He is now working with a financial counsellor to try and manage these debts.

16.     Mr Attard said that he had been informed that the Deed of Release was in the format of a settlement of a compensation award because the computer system would not allow for payments to be made on documentation that did not comply with the provisions of the relevant legislation.   He referred the Tribunal to a letter written to him by Mr Paul Mulvany of Workforce Legal dated 28 August 2006, which said:

I write to you, at your request, to set the background of the settlement of the dispute involving the Workcover Authority and your former employer.  The resolution of the matter was highly unusual given the particular circumstances of the matter.

Prior to consulting me, you had instructed other solicitors to act on your behalf.  Those solicitors had commenced proceedings in the Magistrates’ Court seeking to establish that you had suffered an injury in the course of employment.  Had such an injury been established, it would have created an entitlement to weekly payments of compensation, medical and like expenses and, potentially, a lump sum for permanent impairment.

Proceedings were issued in the Magistrates’ Court. The Magistrate referred the question of your compensation entitlement to the Medical Panel. As you are aware, the Medical Panel determined that you had not suffered an injury within the meaning of the Act, as they did not accept that your condition had been affected by employment. The Magistrates’ Court, which is required by law to do so, implemented the Medical Panel’s finding.

Accordingly, your claim for compensation was formally dismissed by the court and that ruling still stands as an unchallengeable legal finding.  As a matter of law, you are not and were not entitled to compensation.

When you consulted me, I indicated that there was little that could be done about the dismissal of your Workcover claim.  I did, however, indicate that I believe that given certain issues over the treatment of your claim, you ought to receive an ‘ex gratia’ payment.  As you are aware, the WorkCover agent was receptive to this view and agreed to such a payment.

It was made clear in discussions with the lawyer for the WorkCover Authority, however that the WorkCover computer would not allow for the payment of compensation or legal costs given the formal dismissal of your claim.  In order to resolve the matter, it was agreed that the matter would be settled by the payment of a single amount which was calculated on the basis of your weekly payment multiplied by a specified number of weeks.

You will recall that when I was advised that legal costs could not be paid, a compensatory adjustment in the number of weeks was made….

17.     Mr Attard said that he had rejected offers prior to the dismissal of his claim in the Magistrates’ Court because the employer would not admit liability for his condition.  He said that the ex-gratia payment was “hush money” so that he would not reveal matters he had become aware of concerning inappropriate surveillance and the improper conduct of the medical panels.   Mr Attard also provided a letter from the Victorian WorkCover Complaints Unit dated 28 December 2005, acknowledging his complaint of that day over the possible misuse or inappropriate use of surveillance by the WorkCover Agent.

18.     At Centrelink’s request, Michael Gatehouse of Herbert, Geer and Rundle, Solicitors, gave evidence about his knowledge of the settlement as the solicitor for WorkCover.  Mr Gatehouse commented that in his opinion, there was nothing unusual about the Deed of Release or the payment.  He said that a lapsed offer of settlement was reinstated because Mr Attard had threatened to initiate proceedings in the Supreme Court.   Mr Gatehouse said that there was a risk that the Supreme Court would remit the proceedings to the Medical Panel; so a commercially prudent settlement offer would have been made.   

19.     Mr Attard is very keen on undertaking a Certificate III course in fitness, which would allow him to be employed as a personal trainer.  However, the Commonwealth Rehabilitation Service (CRS) will not fund such training for him even though it will allow him to be re-employed.   He said that the money withheld by Centrelink from the lump sum will allow him to pay for the course and perhaps also a Certificate IV.

20.     Mr Attard continues to suffer ill-health.  Dr Charles Castle, Occupational Physician, prepared a letter for the Tribunal dated 12 September 2007, which said:

Mr Attard has asked me to write to you with an explanation of his condition.

Formal Diagnosis:

Tony has a significant depressive disorder with anxiety.  This has been present since March 2004, although I first saw him in August 2004.  He has a lowered mood, sleep difficulties, memory and concentration difficulties.  He has some features of post-traumatic stress disorder

Current Treatment:

I have been providing him with counselling for a long time.  This has taken the form of supportive counselling, and referral to a psychiatrist.  The treatment was interrupted by the severe illness of one psychiatrist, and the cessation of practice of the other.

He is about to start seeing a clinical psychologist, Mr Henry Briffa, but is having difficulty starting the consultations because of insufficient funds.

…

Reason for Condition:

This has arisen as the direct result of major depressive disorder with anxiety and depression which has emanated from his bullying and harassment during his employment with BTI Pty Ltd.  There were a number of court adjournments, which did not help his situation.  He was badly affected by a Medical Panel decision and the actions of the claims agent, CGU.

An ATO decision also badly affected Tony.  He felt the decisions were wrong.

Tony’s lack of employment over the last few years has been a significant problem with severe financial consequences for him.  The inability of CRS to fully find retraining has been another problem.

….

Effect on Judgement:

His illness has affected his judgement, he has difficulty thinking straight, has a lowered mood, and decreased concentration and attention.  This waxes and wanes.  Recently he has been going through a more acute phase.

21.     Whether special circumstances are present needs to be considered on a case by case basis. In considering this concept the Tribunal must maintain a balance between the circumstances and difficulties of the individual involved and the purpose of the legislative provision.  The purpose of the legislation is to prevent a person being paid twice, in this case NSA and a back-dated wage, for the same period of time.

22.     In this matter there is a combination of factors that lead to a finding of special circumstances.  These include the nature and timing of the settlement.  Mr Mulvany, an experienced workers compensation lawyer, provided a written opinion that this was an unusual settlement in that it followed dismissal of Mr Attard’s claim in the Magistrates’ Court but without proceedings being instituted in the Supreme Court.  Mr Mulvany commented that the reason that the Deed of Release was set out in the form of weekly payments was the lack of alternative options for the WorkCover computer where the records showed a dismissal of the claim without an active appeal.   Mr Gatehouse disagreed that the settlement was unusual.  However, the fact that an experienced workers’ compensation lawyer is prepared to commit himself in writing to state that Mr Attard’s settlement was different to the usual is one of the factors in the mix of whether there are special circumstances in this matter. 

23.     Other factors include Mr Attard’s ongoing mental and emotional state; which on the basis of his and Dr Castle’s evidence, appear to be directly related to the wording and circumstances of what Mr Mulvany called an ex-gratia payment.   The dispute over retention of the money by Centrelink and his perception of the injustice of it, given the circumstances of the payment, appear to be major exacerbating factors in his state of ill-health.   

24.     Mr Attard’s financial circumstances of themselves would not be a reason for this Tribunal making a finding of special circumstances.  Many social security recipients find themselves in straitened and/or difficult financial circumstances.  However, Mr Attard’s present financial circumstances are limiting his options of getting on with his life.   He is convinced that undertaking specialist fitness training is the key to his obtaining suitable employment.   He has not been able to obtain funding for the course through CRS.  He therefore wishes to pay for the course himself and get back to work.  

25.     Taking into account the factors described above, the Tribunal is satisfied that this case is out of the ordinary and that there is hardship or unfairness that is sufficient to justify departure from the general rule in the particular case.  Therefore, the Tribunal finds that there are special circumstances in this case. Therefore, the Tribunal decides that it is appropriate to exercise its discretion under s 1184K(1) of the Act to treat the whole of the compensation payment as not having been made. Centrelink will therefore be required to reimburse Mr Attard the $15,660.66 it has recovered from his ex-gratia payment.

DECISION

26.     The Tribunal sets aside the decision under review and substitutes a decision that the whole of the compensation payment arising out from the compensation affected payment dated 1 February 2006 is to be treated as not having been made on the basis of special circumstances. 

I certify that the twenty-six [26] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

(sgd)    Mara Putnis    

Clerk

Date of hearing:  3 October 2007
Date of decision:  9 November 2007
Advocate for applicant:                Mr G Carpenter
Advocate for respondent:            Mr T Noonan, Centrelink Legal Services Branch