Baker and Secretary, Department of Family and Community Services
[2003] AATA 700
•25 July 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 700
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q01/776, Q01/796
GENERAL ADMINISTRATIVE DIVISION )
Re SECRETARY, DEPARTMENT
OF FAMILY AND COMMUNITY
SERVICES (Q01/776)Applicant
And
TREVOR BAKER
Respondent
And TREVOR BAKER (Q01/796)
Applicant
And SECRETARY, DEPARTMENT
OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Senior Member KL Beddoe Date25 July 2003
PlaceBrisbane
Decision The decision of the Social Security Appeals Tribunal is set aside and there is substituted a decision that:
(a) so much of the compensation payment as exceeds $140,296 is to be treated as not having been made;
(b) the compensation part of the lump sum compensation payment is $140,296;
(c) the lump sum preclusion period is reduced accordingly; and
(d) the charge amount of $40,296.11 as calculated by the Authorised Review Officer is affirmed.
.....................(Sgd)....................
KL Beddoe
Senior Member
CATCHWORDS
SOCIAL SECURITY – compensation – lump sum compensation payment – whether interest awarded for past economic loss is compensation – preclusion period – special circumstances – whether part of payment can be treated as not having been made
Social Security Act 1991 ss 17(1), 17(2), 17(3)(b), 17(4), 1165(2AA), 1184(1)
Secretary, Department of Family and Community Services v Mourilyan [2002] FCAFC 207
REASONS FOR DECISION
25 July 2003 Senior Member KL Beddoe 1. The applicant department decided to impose a compensation preclusion period, in relation to the respondent (Mr Baker), from 12 March 1994 to 9 March 2001 and recover a charge in the amount of $40,296.11.
2. By a decision dated 6 August 2001 the Social Security Appeals Tribunal decided to vary the applicant’s decision by determining that the compensation part of the lump sum compensation payment be reduced so that the preclusion period ended on 10 November 2000. The charge amount decision was affirmed.
3. The applicant department sought review in this Tribunal on the basis that the Social Security Appeals Tribunal was in error in not treating interest on damages for economic loss as an amount in respect of lost earnings or lost capacity to earn for the purposes of paragraph 17(3)(b) of the Social Security Act 1991.
4. The respondent (Mr Baker) also sought review of the decision of the Social Security Appeals Tribunal (“SSAT”) on the following grounds:
(a)The SSAT incorrectly interpreted the meaning of “the payment” for the purpose of deciding the preclusion period for the purpose of the Social Security Act 1991 (“the Act”).
(b)The SSAT should have deducted from the amount of $200,243.43 the costs which Mr Baker was required to pay to the defendants pursuant to the said judgment, ie $21,365.46.
(c)The SSAT should have found that the amount of the judgment, for the purpose of the Act, was $178,877.97.
(d)The SSAT should have found that the proportion of the judgment which, in the circumstances of the case, was for economic loss was 70%.
(e)The SSAT should have found that the compensation part of the lump sum, for the purpose of the Act, was calculated by taking 70% of the judgment, or a figure of $125,214.60.
(f)The SSAT should have found, apart from any question of special circumstances under the Act, the number of weeks in the lump sum preclusion period was = 299.70.
(g)In relation to special circumstances under the Act, the Tribunal was not entitled to include superannuation payments as loss of earnings or capacity to earn. Further such amounts to an error of law in the face of record and a breach of natural justice because it was not argued by Centrelink, or by any members of the SSAT during the hearing, that such superannuation payments should be so characterised.
5. Sub-section 1165(2AA) of the Act provides that if:
“(a) a person receives or claims a compensation affected payment; and
(b) the person is a member of a couple; and
(c)the person receives a lump sum compensation payment on or after 20 March 1997 (whether before or after the person receives or claims the compensation affected payment);
no compensation affected payment is payable to the person for the new lump sum preclusion period.”
6. Sub-section 17(1) of the Act relevantly defines that a “compensation affected payment” means, inter alia, a disability support pension.
7. Sub-section 17(2) of the Act provides that “compensation” means:
“(a) a payment of damages; or
(b)…; or
(c)…; or
(d)any other compensation or damages payments
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments) that is:
(e)made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f)…”
8. Sub-section 17(3) provides that for the purposes of the Act, the compensation part of a lump sum compensation payments is:
“(a) …; or
(ab) …; 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.”
9. If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
Income cut-out amount (s 1165(8))
The income cut-out amount is $417.80 (s 17(8)).
10. If periodic compensation payments are made in respect of lost earnings or lost earning capacity, the new lump sum preclusion period is the period that begins on the day after the last day of the periodic payment period, and, ends after the number of weeks worked out as above (s 1165(5)).
11. The Secretary (and this Tribunal) 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.” (s 1184(1))
12. At the hearing Mr McQuinlan represented the Department (the applicant) and Mr McGhie represented Mr Baker (the respondent). The documents lodged in the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal as the “T” Documents. Further documents were tendered and marked as exhibits. No oral evidence was given.
13. There is no dispute as to the underlying facts of this case which may be summarised as follows.
14. The respondent suffered an accident in the course of his employment.
15. In subsequent proceedings in the Supreme Court of Queensland, MacKenzie J set out the circumstances in his judgment. In summary only, those circumstances were that the respondent was involved, with others, in loading empty plastic milk crates onto a truck. There was no dispute that the respondent fell in the course of the loading but the circumstances in which the accident occurred were in dispute before the Court.
16. In the event, the Court found that the respondent, by his actions, contributed to the accident and assessed this contribution at 40%.
17. The Court assessed damages as follows:
§Pain suffering and loss of amenities $40,000.00
§Interest ($15,000 x 2% x 6.5 years) 1,950.00
§Special damages (medication and kneeguards) 1,453.00
§Future medication and kneeguards 3,487.00
§Hospital expenses 880.00
§Medical expenses paid by WCB 4,647.03
§Other expenses 183.79
§Fox v Wood 3,313.40
§Past Economic Loss 100,000.00
§Interest ($36,000 x 5% x 6.5 years) 11,700.00
§Future Economic Loss 175,000.00
§Past care and assistance 8,450.00
§Interest (2% for 6.5 years) 1,100.00
§Future care and assistance 15,000.00
§Past Superannuation 6,458.00
§Future Superannuation 17,250.00
§Past travel to doctor 487.00
§Future travel to doctor 1,200.00
Total $392,559.22
18. That amount was reduced by 40% and damages payable to the respondent of $235,535.53 was awarded by the Court, subject to reduction by $35,292.10 - being refund to the Workers’ Compensation Board, so that the net award to the respondent was $200,243.43 with judgment for this amount being a payment of damages to the respondent.
19. The amounts which are in respect of lost earnings or lost capacity to pay are as follows:
100% 60%
Past Economic Loss $100,000 $60,000
Interest thereon 11,700 7,020
Future Economic Loss 175,000 105,020
$286,700 $172,020
20. Of the $35,292.10 awarded for refund to the Workers’ Compensation Board, an amount of $19,420.08 (T6) relates to past economic loss. I am satisfied that amount should be deducted from the amount awarded to the respondent for past economic loss. The reason is that this amount was in respect of periodic payments being repaid periodic compensation payment within the terms of sub-section 17(4) of the Act.
21. Weekly compensation payments by the Workers’ Compensation Board ceased on 11 March 1994 (T6). Thereafter it appears the respondent was paid benefits under the Act amounting to $40,296.11 and the applicant imposed a charge on the award of damages for this amount (T12) in respect of benefits paid during the preclusion period commencing from 12 March 1994 – the day after weekly payments of compensation ceased.
22. The defendants were ordered to pay the costs except that the respondent was ordered to pay party and party costs for all parties from 17 December 1998 because there was an offer for settlement which exceeded the amount awarded by the Court. The respondent had pleaded his case in tort – not contract – thereby leaving it open to the Court to find the 40% contributory negligence and the reduction of assessed damages after contribution to a figure less than the offer of settlement.
23. The respondent, as plaintiff, succeeded as to an amount of $200,243.43 (Exhibit 2) as already noted.
24. Costs payable by the respondent were assessed at $21,365.46. It is not clear to me that these are only party/party costs but I am prepared to infer this is the case because it is unlikely he would consent to assessment of costs on another basis.
25. In relation to the award for damages relating to superannuation, the applicant did not include these amounts as being in respect of lost earnings and therefore part of the compensation payment. While the applicant does not suggest that these amounts should be included in this case, I am not persuaded that is a correct approach.
Consideration
26. In Secretary, Department of Family and Community Services v Mourilyan [2002] FCAFC 207 the Federal Court decided that interest awarded for past economic loss is a payment which is in respect of the past economic loss and therefore included in the compensation part of the lump sum.
27. It follows, in my view, that the decision of the SSAT (made before the Full Court’s decision), which excluded the interest component from the compensation part of the lump sum, is no longer correct as to that aspect.
28. The Authorised Review Officer calculated the compensation part of the lump sum as follows (cents ignored):
Past Economic Loss $100,000
Interest thereon 11,700
Future Economic Loss 175,000
286,700
Less 40% 114,680
172,020Less Refund to WorkCover of
weekly compensation payments 19,420
$152,060
______
29. The respondent says it should be calculated as follows (cents ignored):
Economic Loss assessed $275,000
Deduct 40% for contributory negligence 110,000
165,000
Less Workers Compensation Refund 35,292
129,708
Less costs payable to defendants 21,365Compensation part of lump sum $108,343
______
30. To support his argument that the amount of $35,292, being the refund to WorkCover, should be deducted in full, the respondent relies on paragraph 17(3)(b) of the Act which provides that the compensation part of a lump sum compensation payment is so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn.
31. Sub-section 17(4) of the Act provides for reduction of the lump sum payment but only in respect of periodic compensation payments. In this case the amount of such payments is $19,420 and the Authorised Review Officer made the adjustment required by the sub-section.
32. The difficulty with this case is that the actual payment to the respondent is less than the amount calculated by the applicant as the compensation part of the lump sum payment. I was told the respondent was paid about $100,000 after payment of his own costs.
33. It is apparent that the respondent’s decision not to accept the defendant’s offer of settlement not only resulted in an adverse result in the Supreme Court but he also lost the benefit of paragraph 17(3)(a) of the Act which would have resulted in a lower compensation part of the lump sum compensation payment assuming a settlement in the vicinity of $250,000 with costs.
34. Assuming that the respondent actually received $100,000 over a period of 365 weeks, this is $274 per week – a figure considerably less than the factor for average weekly earnings figure.
35. The compensation divisor used by the applicant of $417.80 was correct (T15). I cannot see any basis for using a later higher divisor as submitted for the respondent.
36. The charge imposed under the Act was $40,296.11 (T26). The respondent does not dispute this figure but does claim that it should be taken into account as a deduction, a view which I do not agree with because it is merely a refund of moneys already received.
37. In my view, and I infer, that the payment received by the respondent is in the vicinity of $100,000 plus $40,296 (being the amount attributed to social security payments to the respondent in the period 21 March 1994 to 17 August 1999).
38. Sub-section 1184(1) of the Act provides that the Secretary may treat the whole or part of a compensation payment as not having been made if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
39. In this case I am satisfied that the outcome in the Supreme Court can be accepted as constituting special circumstances. Not because the judgment was unfair but because the judgment had an unintended consequence in terms of the Act. In particular, the awarding of costs against the applicant when he was successful might be thought to be an unintended consequence that should be taken into account for the purposes of the Act.
40. There is also the issue of the applicant finishing up with an all-up payment that over the lump sum compensation period is less per week than the compensation divisor (in this case $417.80 per week).
41. For these reasons I think it is appropriate to treat so much of the compensation payment as exceeds $140,296 as not having been made. That has the effect of reducing the lump sum preclusion period to 336 weeks and the lump sum preclusion period is (I calculate) 12 March 1994 to 18 August 2000.
42. The decision of the Social Security Appeals Tribunal will be set aside and there is substituted a decision that:
(a)so much of the compensation payment as exceeds $140,296 is to be treated as not having been made;
(b)the compensation part of the lump sum compensation payment is $140,296;
(c)the lump sum preclusion period is reduced accordingly; and
(d)the charge amount of $40,296.11 as calculated by the Authorised Review Officer is affirmed.
I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member KL Beddoe
Signed: Sarah Oliver
AssociateDate of Hearing 20 June 2002 (adjourned for written submissions after decision in Mourilyan’s case)
Date of Decision 23 July 2003
Solicitor for the Department Mr R McQuinlan, Departmental Advocate
Solicitor for Mr Baker Mr S McGhie - Richardson McGhie, Solicitors
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