Banicek and Secretary, Department of Employment and Workplace Relations
[2006] AATA 435
•19 May 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 435
ADMINISTRATIVE APPEALS TRIBUNAL )
) No S2005/326
GENERAL ADMINISTRATIVE DIVISION ) Re SLAVICA BANICEK Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Senior Member L Hastwell Date19 May 2006
PlaceAdelaide
Decision The Tribunal sets aside the decision and remits the matter to the Department to recalculate the preclusion period accordingly.
..............................................
L HASTWELL
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – Disability Support Pension – compensation affected payment – preclusion period – three lump sum payments between 1998 and 2004 – back injury – two different conditions – second payment related to specific condition for which no economic loss claimed – advice to applicant regarding preclusion period correct at time it was given – change to the legislation – second condition mentioned in third agreement – special circumstances – unfairness to the applicant – decision set aside
Social Security Act 1991 ss 17, 1169, 1170, 1171, 1184K
Social Security Act 1947 s 152(2)
Workers Rehabilitation and Compensation Act 1986 (SA) s 43
Family and Community Services Legislation (Simplification and Other Measures) Act 2001Acts Interpretation Act 1901 s 23
Secretary, Department of Social Security v Banks (1990) 20 ALD 19
Department of Social Security v Cunneen (1997) 78 FCR 576
Re Fuller and Secretary, Department of Family and Community Services [2004] AATA 615
Smith v Federal Commissioner of Taxation (1987) 164 CLR 513
Re Barrington and Secretary, Department of Employment and Workplace Relations [2005] AATA 1050
Secretary, Department of Family and Community Service v Allan (2001) 66 ALD 147REASONS FOR DECISION
19 May 2006 Senior Member L Hastwell 1. Ms Slavica Banicek (the applicant) sustained injuries to her back in the course of her employment. She also suffered from dermatis that was employment related. She received three separate lump sum workers’ compensation payments for these injuries between 1998 and 2004.
2. In May 2005, some months after her weekly payments of workers’ compensation had ceased (June 2004), the applicant made enquiry about her entitlement to Disability Support Pension (DSP). She was advised that the three separate compensation payments would be added together and treated as one lump sum. As DSP was a compensation affected payment, a preclusion period from receipt of benefits was imposed from 19 June 2004 to 16 December 2005.
3. The applicant sought a review of the decision. It was affirmed by an Authorised Review Officer on 22 July 2005. Upon review to the Social Security Appeals Tribunal (the SSAT) that decision was affirmed on 31 October 2005.
legislation
4. The relevant legislation is contained in the Social Security Act 1991 (the Act). Section 17(1) of the Act defines a “compensation affected payment” to include DSP.
5. “Compensation” is defined in s 17(2) of the Act as:
“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.”
6. The compensation part of the lump sum is determined by s 17(3) of the Act as follows:
“17(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.”
7. Multiple lump sum payments can in some instances be deemed to be a single lump sum compensation payment. The relevant provisions are contained in ss 1171(1) and (2) of the Act which provides as follows:
“1171(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.
1171(2)A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.”
8. Compensation affected payments are not payable during a preclusion period. The relevant provision is s 1169(1) of the Act which provides as follows:
“1169(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.”
9. The preclusion period is calculated pursuant to s 1170(4) of the Act which provides:
“1170(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
Income cut-out amount”
10. In some instances the Secretary may disregard certain payments. Section 1184K(1) of the Act provides:
“1184K(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.”
11. Section 43 of the South Australian Workers Rehabilitation and Compensation Act 1986 (the Compensation Act) provides (inter alia) as follows:
“43 Lump sum compensation
(1)Subject to this Act, where a worker suffers a permanent disability and the disability is compensable under this Act, the worker is entitled (in addition to any entitlement apart from this section) to compensation for non-economic loss by way of a lump sum.
…”
12. Section 42 of the Compensation Act provides (inter alia) as follows:
“42 Redemption of liabilities
(1) Any of the following liabilities may, by agreement between the worker and the Corporation, be redeemed by a capital payment to the worker
(a) a liability to make weekly payments;
(b) a liability to pay compensation under section 32;
(c) a liability to make a capital payment for loss of future earning capacity.
…”
background
13. On 30 October 1998 the applicant settled her entitlements under s 43 of the Compensation Act for her back injury and received a lump sum payment which was for non-economic loss.
14. In January 2000 she settled a claim under s 43 of the Compensation Act with respect to dermatitis to her hands and received a lump sum payment which was for non-economic loss.
15. In June 2004 the applicant settled her claim under s 42 of the Compensation Act which payment related to both her back injury and dermatitis. This payment contained an economic loss component.
issues
16. The issues to be determined by the Tribunal in this case are:
·whether all three lump sum payments of compensation received by the applicant can be added together and treated as one lump sum for the purposes of calculating the preclusion period; and
·whether there are any special circumstances that could allow the Tribunal to disregard some or all of the compensation that has been paid in calculating the preclusion period.
the hearing
17. The applicant and her husband represented themselves. They related their perspective on the events that gave rise to the application for review. The respondent (the Department) was represented by Mr Goldsworthy.
18. The applicant sustained a back injury in March/April 1997 while working for the Central Linen Service. After a month off work on compensation payments, she returned to work, working part-time and on light duties. She received top-up compensation payments. She was soon forced to stop working altogether because of the level of disability she was experiencing from the back injury. She continued to receive weekly compensation payments thereafter with respect to that back injury and right through until she settled her workers’ compensation claim with her employer in June 2004.
19. She had also developed dermatitis in her hands many years earlier as a result of the duties of her employment. For years she had used cotton gloves and cream on her hands. She said that the dermatitis had never affected her capacity to work. She eventually made a claim under s 43 of the Compensation Act with respect to this condition, and received a lump sum payment with respect to disability arising from her dermatitis in January 2000. There was no economic loss component in that payment.
20. The applicant was told by her legal adviser and by the union when she settled each of the s 43 claims that the lump sums that she received for disability alone in 1998 and 2000 would not create a preclusion period from receipt of benefits in the future because they did not contain any economic loss component.
21. She expressed confusion and distress that payments received 6 and 4 years before the third payment had nothing to do with wages were now being treated as through they were for loss of earning capacity.
22. When the applicant received the third payment of compensation under s 42 of the Compensation Act in 2004, she used the funds to pay off a mortgage. She said that although she and her husband were not in financial hardship, they were not comfortably off. They had understood a preclusion period would be imposed based on 50 percent of the final payment received by her and not on the basis of all three payments being added together.
findings of fact
23. The Tribunal makes the following findings:
·The applicant suffered a back injury in the course of her employment with the Central Linen Service on 5 March 1997. Thereafter she did not return to full-time work. She ceased work in September of that year. She continued to receive weekly compensation payments as her employer accepted liability for the injury as being work-related.
·The applicant received weekly compensation payments from the date of her back injury until June 2004 when her weekly payments ceased. The weekly compensation at all times related to the back injury.
·On 30 October 1998 a consent order was endorsed by the South Australian Workers’ Compensation Tribunal whereby she was awarded the sum of $24,614.80 under s 43 of the Compensation Act for disability alone. That payment was for 25 percent impairment to the lower back and lumbar spine and for 5 percent impairment of the right leg at or above the knee. There was no economic loss component contained in that award.
·The applicant has suffered from dermatitis for many years. The condition has never affected her ability to work. She made a claim for disability with respect to that condition and liability was accepted by her employer. On 3 February 2000 she settled a claim for dermatitis to her hands in the sum of $15,693.04. There was no economic loss component in that award. That award was also under s 43 of the Compensation Act.
·The applicant was advised by her union and legal advisers that no preclusion period would arise as a result of receipt of the first two sums.
·On 16 June 2004 the applicant entered into a consent agreement under s 42 of the Compensation Act, whereby she accepted the sum of $60,000 in respect of weekly payments and $1,926.65 in full satisfaction of her entitlements to compensation under s 32 of the Compensation Act. This consent agreement redeemed her entitlement to weekly payments. Her weekly payments ceased. An economic loss component was contained in this award.
·Preamble A to that final agreement (T9/42) recorded that the agreement was for compensable disabilities to “(i) 5/8/97 - Back, hip and right leg” and “(ii) 15/1/99 - Right and left hands”.
·At no stage did the applicant make a claim for weekly payments with respect to her dermatitis and at no stage did she allege that the dermatitis precluded her from working.
·The applicant’s financial circumstances are set out in the T documents. The applicant and her husband are not currently in financial hardship.
·The applicant was aware of the prospect of a preclusion period and based on her advice she had a reasonable idea of the likely length of that period based on the third payment only being used to calculate the preclusion period. She made no application for DSP for a number of months after receipt of her lump sum payment in June 2004. She and her husband used the third payment of funds to reduce debt, paying the entire sum into a home loan.
·A Statement of Expenditure and Circumstances completed by the applicant on 19 May 2005 indicated that she and her husband had $840.00 in the bank at that time. They owned three properties, two of which were rented out. Their own property was freehold.
application of the law
24. The applicant applied for DSP which is a compensation affected payment pursuant to s 17(1) of the Act.
25. The applicant had received three lump sum payments by way of compensation. The first payment was for a back injury and sequelae. It was awarded under s 43 of the Compensation Act and was expressed to be for disability alone. The second payment awarded related to an entirely different claim, and was also under s 43 of the Compensation Act. That payment was for a different condition, namely dermatitis. A consideration of the wording of s 43 of the Compensation Act (supra paragraph 11) supports the view that s 43 payments do not contain an economic loss component. Section 43(1) expressly refers to compensation for “non-economic loss”. There was no loss of earnings component in either of these first two payments.
26. Some years later, a third lump sum was paid to the applicant which contained an economic loss component, being a s 42 payment under the Compensation Act. A consideration of s 42 (supra paragraph 12) confirms that economic loss was contained in that award. The issue for the Tribunal is whether all three payments can be added together for the purposes of calculating a preclusion period in this case.
27. It appears likely that the third payment was in reality likely to be for back injuries only, but the solicitors included dermatitis as a factor in that claim despite the fact that the applicant had never claimed for loss of earnings for dermatitis, nor was there any issue of that condition impacting on her earning ability.
28. The Department argues that s 1171(1) of the Act is straightforward, and if a person receives two or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation, and at least one of those payments is made wholly or party in respect of lost earnings or lost capacity to earn, then the person is taken to have received one lump sum compensation payment equivalent to the sum of the multiple payments. The total payment is taken to have been received on the day on which that person received the last of the multiple payments.
29. The applicant acknowledges that she had received compensation within the meaning of s 17(2) of the Act being a payment that was wholly or partly in respect of lost earnings when she received the third lump sum payment under s 42 of the Compensation Act. She does not accept that the two earlier payments should be added to the third. She argues that neither of the first two payments contained an economic loss component and that it is not correct or fair to add the first two payments to the later payment and thereby double the preclusion period that she would otherwise be subject to.
30. Section 1171(1) of the Act does not refer to “lump sum compensation payments” which would then attract the definition of s 17(2) and a lump sum payment would then require an aspect of lost earnings in it before it could be added into other lump sums received. The wording of s 1171(1) of the Act is broad and it seems that a lump sum, regardless of whether it has an economic loss component or not, is included in the definition. This has been the accepted position in numerous prior cases.
31. Prior authorities, which are binding on this Tribunal, define what the term “lump sum” means. In the case of Secretary, Department of Social Security v Banks (1990) 20 ALD 19 in considering s 152(2) of the Social Security Act 1947 (the 1947 Act) and after noting that the term “lump sum” was not defined in that Act, von Doussa J said at p 24:
“A ‘lump sum’ payment is simply one which includes a number of items. Where a payment by way of compensation consists of the aggregate of several amounts which could have been paid separately or at different times the payment is one of a lump sum. A payment the total of which is arrived at by adding amounts for different heads of loss would also be a lump sum payment.”
32. In the case of Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576, Foster J followed Banks and rejected the proposition that each component of the total sum payable would be in themselves individual lump sum compensation payments. He took the view that the proper construction of legislation required that the total sum payable is the lump sum and not the component parts of the individual lump sums. He went on to say at p 583:
“… The words’ lump sum’ are not defined. They are not words of art. In the Macquarie Dictionary a ‘lump sum’ is defined as a sum ‘including a number of items taken together or in the lump’. In my opinion the words bear that meaning in the section … a ‘lump sum’ payment is simply one which includes a number of items. …”
This is the approach that has been consistently followed by cases since.
33. Justice Downes in Re Fuller and Secretary, Department of Family and Community Services [2004] AATA 615 commented at paragraph 18:
“… it is apparent that the underlying object of the legislation was to neutralise the advantage of obscuring the economic loss components of workers compensation settlements ….”
34. Section 1171(1) of the Act was introduced to the Social Security Act 1991 by the Family and Community Services legislation (Simplification and Other Measures) Act 2001 (No 71 of 2001) and it replaced s 17(2B) of the Act which provided:
“For the purposes of this Act, if:
(a)a person receives more than one lump sum payment, whether simultaneously or at different times, in relation to one or more injuries arising from the same event (see subsection (5A)); and
(b)at least one of the payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the person is taken to receive one lump sum compensation payment, made wholly or partly in respect of lost earnings or lost capacity to earn, of an amount equal to the sum of those lump sum payments.”
35. At the time that the applicant received the first two payments, s 17(2B) was the relevant section that provided for the adding together of lump sum payments. It had slightly different and arguably narrower wording. The first and second payment could not have been added together under s 17(2B) as the injuries arose from quite different events. The applicant’s back injury arose from a specific incident at work. The dermatitis was a long-term condition from which she suffered. They were not injuries arising from the same event. However, the third payment was not made until the new and broader definition of s 1171(1) was introduced in 2001 and the broad terms of the new provision clearly catch the two earlier payments.
36. The words “in relation to the same event” as contained in the current Act have been considered on many occasions and most recently in the cases of Re Fuller (supra) where Justice Downes referred to the words of Toohey J in Smith v Federal Commissioner of Taxation (1987) 164 CLR 513:
“that ‘in relation to’ like ‘in respect of’ was ‘probably the widest of any expression intended to convey some connection between two related subject matters’. These statements show just how wide the expression ‘in relation to’ is.”
37. The Tribunal accepts that the third lump sum because of the wording that relates it back to the two earlier conditions, was in relation to the same events that the first two lump sums were paid for, namely the back injury and the hand condition. In that regard the Tribunal refers to s 23 of the Acts Interpretation Act 1901 which provides:
“In this Act, unless the contrary intention appears:
(a)words importing a gender include every other gender; and
(b)words in the singular number include the plural and words in the plural number include the singular.”
The Tribunal is satisfied that in the context of this case it is appropriate to read the word “event” in the plural.
38. Section 1171 of the Act is broad enough to catch all three payments as being in relation to the same event, or in this case “events” in that the third payment referred back to the two separate events, being the back injury and the hands.
39. The Tribunal is asked to consider whether there are any circumstances in this case that would give rise to the operation of s 1184K(1) of the Act and allow the Tribunal to treat the whole or part of the compensation payment as not having been made.
40. In the case of Re Fuller, Justice Downes pointed out that hardship is one basis of the exercise of the discretion in s 1184K of the Act, but that unfairness is also a basis of the exercise of that discretion. Moreover, he took the view that “being treated unequally can be a hardship”. In that case Justice Downes remitted the matter back for further consideration by the Tribunal with his comments that where the costs agreed in a settlement are a genuine assessment of those costs then an unfairness arose out of the different way in which the applicants are treated.
41. In the recent case of Re Barrington and Secretary, Department of Employment and Workplace Relations [2005] AATA 1050 , Deputy President Groom in the application of s 1184K(1) of the Act quoted Heerey J in Secretary, Department of Family and Community Service v Allan (2001) 66 ALD 147 at 150 in the following terms:
"It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances: Beadle v Director-General of Social Security (1985) 7 ALD 670 at 673; 60 ALR 225 at 228. Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances: …"
42. Deputy President Groom commented that:
“26. … the decision-maker … is given a wide discretion, not limited by legislated particulars, to consider all the circumstances of a case and to decide whether they are "special" thus permitting the exercise of the discretion. In order to properly exercise this discretion there must be special elements in the case which stand apart from the usual or the ordinary.”
43. The applicant and her husband gave evidence in a forthright manner and were genuinely distressed at the circumstances that they found themselves in. They received payments some 6 and 4 years ago which they were assured would not impact in any way on any future Social Security entitlements, and at the time these payments would not have impacted on future Social Security entitlements. It would appear that the unrelated injury of the dermatitis has been inadvertently drawn into the process by a reference to it in the third agreement, thereby introducing an element of unfairness in this case.
44. The Tribunal is satisfied that there is an unfairness to the applicant in this case in using the total of all three lump sum payments to calculate the preclusion period and that the discretion under s 1184K of the Act should be exercised. Unfairness arises from the following issues:
·The very significant time that has elapsed between the first and the third payments and the genuine expectation that the applicant had, partly caused by the 6 year time period that the first two payments could not give rise to any Social Security implications.
·The applicant was assured by legal and union advisors when she accepted the first and second lump sum payments that they could in no way impact on a future Social Security entitlement. That was correct advice at the time based on the law as it stood at the time.
·The applicant never received weekly payments for dermatitis. The dermatitis was included in the third s 42 payment in what appears to have been an excess of legal caution. It is only this reference in the third agreement to dermatitis that has drawn the second lump sum into the calculation of the preclusion period.
·The third payment could only have related to a redemption of weekly payment with respect to the back injury.
·The applicant made provision for what she understood the correct preclusion period to be. She did not make application to the Department until she understood that period had almost expired and it was only then that she became aware that the lump sums received several years earlier would be drawn into the calculation of the preclusion period.
·Based on her understanding as to the preclusion period the applicant and her husband inadvertently put themselves in difficult financial circumstances for a period of time.
45. In the circumstances, the Tribunal is of the view that it is fair to disregard some, but not all, of the payment. The Tribunal refers once more to the decision in Re Barrington (supra) and in the words of Deputy President Groom:
“It is not necessary to precisely calculate a figure, but to consider all of the relevant facts and circumstances to try to achieve fairness and justice.”
46. The Tribunal has carefully considered the facts of this matter and has decided that special circumstances do exist in this case and it is fair, based on all the circumstances, to disregard the second of the payments made, being the payment for dermatitis in the sum of $15,693.04. This sum should be deducted from the total lump sum used to calculate the preclusion period. The matter is remitted to the Department to recalculate the preclusion period accordingly.
I certify that the 46 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member L Hastwell
Signed: .........................J Coulthard................................
AssociateDates of Hearing 27 March 2006 and 31 March 2006
Date of Decision 19 May 2006
Counsel for the Applicant In person
Solicitor for the Applicant -
Counsel for the Respondent Mr C Goldsworthy
Solicitor for the Respondent Centrelink Legal Services Branch
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