Bellamy and Secretary to the Department of Family and Community S Ervices
[2003] AATA 1264
•12 December 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 1264
ADMINISTRATIVE APPEALS TRIBUNAL Nº A2003/235
GENERAL ADMINISTRATIVE DIVISION
Re: ANGELA ANTONIE BELLAMY
Applicant
And: SECRETARY TO THE
DEPARTMENT OF FAMILY ANDCOMMUNITY SERVICES
Respondent
DECISION
Tribunal: Mr W.G. McLean, Member
Date: 12 December 2003
Place: Melbourne
Decision:The decision under review is affirmed.
(sgd) W.G. McLean
Member
SOCIAL SECURITY ‑ parenting payment ‑ lump sum compensation payment ‑ preclusion period ‑ recoverable amount ‑ decision affirmed
Social Security Act 1991 ss17(2), 1169, 1170, 1184K
Secretary, Department of Family and Community Services v Banks (1990) 23 FCR 416
Re Nehme and Secretary, Department of Family and Community Services (2002) 71 ALD 443
Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570
Re Secretary, Department of Social Security and Beaumont (1990) 20 ALD 482
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
REASONS FOR DECISION
12 December 2003 Mr W.G. McLean, Member
The Tribunal considered an application from Mrs Angela Antonie Bellamy (the applicant) for the review of a decision of the Social Security Appeals Tribunal (SSAT) made on 9 April 2003. The SSAT decided to affirm the decision of an authorised review officer of the Secretary to the Department of Family and Community Services (the respondent) made on 20 December 2002. The respondent decided to recover an amount of $14,990 arising from the payment of parenting payment to the applicant during a lump sum preclusion period.
The Tribunal received into evidence the documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act1975 (the T documents).
The applicant was self‑represented and the respondent was represented by Ms K. Navarro, a Centrelink advocate.
On 19 August 1998, the applicant sustained an injury fracturing her left patella in a food hall at the Tuggernong Hyperdome. She issued a statement of claim against Leda Holdings Pty Ltd (Leda) for damages and economic loss arising from loss of earning capacity, in the Australian Capital Territory Supreme Court on 28 September 2000. The applicant filed a Statement of Particulars on 9 October 2001 wherein she states the following in respect of her claim for "economic loss" resulting from her injury:
No claim is made for past loss of earning capacity, the plaintiff having chosen not to work whilst she raised her family. It was the plaintiff's intention to return to the workforce once her children were older. As a result of her ongoing disabilities, the plaintiff's employability on the open labour market has been significantly reduced. The plaintiff makes a claim for reduction of earning capacity in the future due to her ongoing disabilities.
The applicant indicated that her case against Leda/American Home Assurance was settled out of Court in mid‑July 2002. Her solicitor in this matter, Ms Geraldine Branch of Pappas J‑Attorney wrote to Centrelink on 30 July 2002 as follows:
I advise that Mrs Bellamy's public liability claim has settled for the sum of $87,000 plus costs and disbursements agreed in the sum of $33,000. Would you please indicate what, if any, amount is repayable to Centrelink from the proceeds of Mrs Bellamy's claim.
The applicant indicated that the reason for her application for review of the respondent's decision was to request the Tribunal to
revisit the original documents lodged with the Supreme Court. To see if they in fact contained a loss of income which would legally entitle Centrelink to deem 50% for same.
The applicant says that she has consistently maintained that there was no loss of income.
The applicant requested the Tribunal to note that certain documents included by the respondent amongst the T documents have no bearing whatsoever on her case. T28 is a letter dated 13 September 2002, written by the applicant to Mr G. Walker of Centrelink, responding to his letter dated 4 September 2002 regarding the respondent's decision to recover $14,990 arising from the payment of parenting payments to her during a lump sum preclusion period. T29 is a letter dated 30 November 2001, written by the applicant to Ms Annette Ellis MP - Federal Member for Canberra, concerning this matter and T30 is Ms Ellis's reply to the applicant dated 21 December 2001. The applicant says that the first time that she became aware that these documents were in Centrelink's possession was when they formed part of the SSAT bundle of documents. She says:
I informed SSAT that I was prepared to sign a Stat. Dec. telling them that they should not be there or part of any consideration process, to which they replied, that they were really nothing anyway.
The Tribunal notes the applicant’s contention that her letter to Mr Walker dated 13 September 2002 (T28) was written by her hastily, emotively and was ill informed.. She said that she subsequently decided to withdraw documents T28, T29 and T30, preferring to wait until she had seen her solicitor's documents before lodging any formal appeal. The applicant does not resile from the fact that she prepared and wrote her above‑mentioned letters T28 and T29.
The Tribunal concurs with the explanations by the SSAT concerning the application of various sections of the Social Security Act 1991 (the Act) referred to in paragraphs 21 to 25 of its reasons for decision (T2, pages 7 and 8) and the applicant does not dispute this interpretation of the law by the SSAT.
Section 17(1) of the Act includes a parenting allowance as a defined compensation affected payment. Section 17(2) of the Act provides the following:
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.
The respondent referred the Tribunal to the remarks of von Doussa J in Secretary, Department of Family and Community Services v Banks (1990) 23 FCR 416, which are discussed in detail by Senior Member Sassella in Re Nehme and Secretary, Department of Family and Community Services (2002) 71 ALD 443. The following relevant extracts are taken from Senior Member Sassella's decision:
In Banks the respondent had received weekly payments of workers’ compensation for an injured back. In November 1988 his compensation entitlements were settled through the making of a consent order in the Industrial Court of South Australia which required the employer to pay $34,000, being an assessment of compensation payable under the Workers’ Compensation Act 1971 (SA) for injuries which had resulted in total or partial incapacity. Additionally, the employer was required to pay $1000 in redemption of liability to pay future medical expenses. Under s 153 of the Social Security Act 1947 (Cth) Banks was precluded from receiving benefits under that Act for a period calculated in the same manner as provided for by ss 17 (3), 1165 (1) and (4) of the present legislation. Consequently, a determination was required of “the compensation part of the lump sum payment by way of compensation”.. This was 50% of the “lump sum payment”.
The Department of Social Security calculated the “compensation part” by taking the whole of the $35,000 as being the “lump sum payment”.. On appeal to the Administrative Appeals Tribunal the $1000 for future medical expenses was excluded from the lump sum. On appeal to this court, von Doussa J restored the original decision holding that the “lump sum payment” embraced the total amount paid in settlement of the claim, even though it clearly included amounts for heads of loss which were unrelated to capacity for work. Such heads were for pain and suffering, disfigurement and future medical expenses.
In reaching this decision his Honour had regard to part of the history of the legislation, which I shall not repeat in detail here. It is clear that problems had arisen as a result of settlements in workers’ compensation jurisdictions obscuring the fact that payments were being received in respect of lost earnings or earning capacity. Where social security benefits conditioned upon such incapacity were also being received, undesirable “double-dipping” was resulting, with the consequence that social security benefits were being misapplied. His Honour had regard to the second reading speech for the Bill introducing the Social Security Amendment Act 1988 (Cth) which introduced the sections in question in order to identify the mischief which it was intended to rectify. The relevant passage read as follows (Hansard, House of Representatives, 13 April 1988, p 1498):-
“This Bill contains measures to improve the administration and integrity of compensation recovery provisions. Where a person receives personal injury compensation that makes up for lost income the Social Security Act provides that pension or benefit may be reduced or recovered. This is one way in which social security expenditures are directed to those most in need.
Settlements of lump sum compensation particularly in the workers compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of Social Security payments. To prevent this abuse the minister announced on 8 February 1988 that, for future personal injury settlements made by agreement or by consent order, 50 per cent of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect that proposal. Where, on the other hand, a court has made an order after a contested hearing specifying the economic loss component, the Secretary to the Department will continue to have regard to the characterisation given to the board by the court.”
His Honour said of the relevant section that it introduced “an arbitrary formula to be applied if the lump sum payment was made in settlement of a claim” (p. 422). He went on to say (at 422–3):-
“Section 152 (2) (c) applies where there is ‘a lump sum payment by way of compensation’. The expression ‘payment by way of compensation’ is defined in s 152 (2) (a). The words ‘lump sum’ are not defined. They are not words of art. In the Macquarie Dictionary in 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. The words are used in Pt XVII of the Act to distinguish ‘lump sum payments by way of compensation’ from ‘periodical payments by way of compensation’ … 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.”
Section 1184K of the Act provides the following:
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.
Senior Member Sassella's decision Re Nehme also discusses the following relevant authorities pertaining to s1184K of the Act:
(29) In Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 Mr Hulls was injured in a motor vehicle accident while working for Australia Post in 1984. He was paid workers’ compensation for a period and sued the other driver in a common law damages action. This action was settled in 1988 for $70,000. His legal costs were almost $12,000 but were not identified as an item in the settlement figures which were a simple global sum. The tribunal had held that the legal costs could be deducted from the compensation amount used in calculating the preclusion period. The tribunal made this decision using the then equivalent section to the current s 1184K of the Act to find special circumstances. It did not adopt a modified interpretation of the concept of compensation as defined in s 17 (2) of the Act.
(30) The tribunal had made its decision on the assumption that an amount for legal expenses would have been excluded from the settlement lump sum if the amount had been agreed upon between the parties. At pages 578–579 the judge said:
… I agree with the actual decision of the tribunal that the correct amount of the lump sum in this case was $70,000 but I cannot agree with the tribunal that this figure would have been reduced if the parties to the settlement of the common law claim for damages had agreed upon an amount for costs.
… I have come to the conclusion that, in this case, the amount of the lump sum was $70,000 and hence, subject only to the possible application of [s 1184K], the “compensation part” was $35,000. Although the tribunal also came to this conclusion it did so only because it concluded that “there was no separate allowance” made for legal costs in the figure of $70,000. The tribunal correctly noted that “costs” are to be distinguished from “damages” but, in my opinion, incorrectly concluded that if an amount for costs had been identified by the parties to the settlement then the amount so identified would have been deducted from the $70,000 in order to arrive at the amount of the lump sum.
This settlement was in respect of a common law claim for damages; it is a fact that the overwhelming number of such settlements contain an element of legal costs just as it is a fact that many such settlements are negotiated by arriving at a global figure which is said to be "inclusive of costs". It is as commonplace for any such settlement to contain an element for costs as it is to contain elements to special damages for general damages for pain and suffering and for economic loss. The legislation would have been fully aware of all such components when the "50% rule" was introduced. It is my opinion that the tribunal concluded that there were special circumstances warranting the application of [s 1184K] to the legal costs predominantly — if not only — because of the perceived failure of the parties to the settlement to identify and quantify the costs. The tribunal said (at 331‑2): "If they had been awarded as a separate item from the lump sum payment of damages, they would not have been included in the lump sum payment figure used pursuant to s 152 (2) (c). It is certainly not [unusual] for costs to be included in the lump sum but is more usual for them to have some separate character. It seems to us therefore, that this is a proper case in which there are special circumstances which made it appropriate to treat that part of the settlement moneys spent on legal fees to be treated as not having been made as part of the payment by way of compensation ie $11, 966.12."
In a’Beckett‘s case ((1990) 26 FCR 349) the social [sic] Security Appeals Tribunal was of the opinion that the pensioner’s legal costs of $6000 should have been excised from the settlement sum of $60,000 for the purpose of applying the “50% rule”. Von Doussa J said: “If any part of the sum of $60,000 received by the respondent were a payment of the kind described in s 152 (2) (a), being a payment in whole or in part in respect of incapacity for work, the component in that sum representing legal costs should probably be treated as part of the ‘lump sum payment by way of compensation’..” I respectfully agree with these remarks.
… it is not to the point, in my opinion, to say that legal expenses did not relate to an incapacity for work. Even though such a statement may be literally true, it cannot assist Mr Hulls. A “payment by way of compensation” is, according to s 152 (2) (c) a reference to one or more of the four nominated types of payment that is or are “in whole or in part, in respect of incapacity for work” [Emphasis added].
(31) At page 581 O’Loughlin J found that there were no special circumstances warranting the application of [s 1184K] in Mr Hulls’ favour. It would seem that his common law claim for damages was a routine claim. The judge said there was nothing to suggest any circumstance was present that made it special. He said that it was commonplace for such claims to be settled on the basis of a global sum with the plaintiff meeting his liability for his legal costs.
(32) In Re Secretary, Department of Social Security and Beaumont (1990) 20 ALD 482 Mr Beaumont had suffered a work injury in 1985. In 1989 he was awarded a lump sum payment of compensation, by consent, amounting to $116,000. The amount was said to cover a number of items but made no mention of legal costs. The SSAT had decided that, before calculating the compensation part of the lump sum payment, Mr Beaumont’s legal costs associated with the compensation claim were to be deducted from the $116,000. Deputy President Burns held that the Act did not authorise the exclusion of any legal costs from the lump sum before calculating the “compensation part of that lump sum”. At page 483 the learned Deputy President said:
(12) The relevant provisions of the Act do not authorise costs (legal or otherwise) being excluded from the lump sum, before calculating the compensation part of the lump sum payment by way of compensation in accordance with s 152 (2) (c) (i) (A) or (B). It is clear, in my opinion, because of the inherent difficulties associated with ascertaining in lump sum settlements with any degree of certainty, what portion is in fact compensation in respect of incapacity for work that parliament is fixed a certain percentage, ie 50%. It follows that parliament has intended the remaining 50% to be the compensation, costs and other sums which are not in respect of incapacity for work. The lump sum in this particular case did not include the sum for costs — it comprised the total of the amounts of $25,000, $5000 and $86,000 previously outlined. Even if the lump sum had included legal costs, then there is no warrant to exercise them from the lump sum before making the necessary calculation.” [Tribunal's Emphasis]
The Tribunal finds that the applicant received a lump sum payment of compensation pursuant to s17(2) of the Act of $120,000 in respect of her public liability claim against Leda and that this payment was made partly in respect of lost capacity to earn resulting from her personal injury. The respondent has correctly calculated the lump sum preclusion period, based upon 50 per cent of the $120,000 lump sum payment, as being from 19 August 1998 to 25 July 2000. This resulted in a decision by the respondent on 20 December 2002 to recover an amount of $14,990 arising from the payment of parenting payment to Mrs Bellamy during the lump sum preclusion period.
Section 1184K of the Act allows the respondent to treat whole or part of the compensation payment as either not having been made or not liable to be made if it is considered appropriate to do so in the special circumstances of the case. The Tribunal concludes from the abovementioned authorities that it is well accepted by the Federal Court of Australia and by the Tribunal that legal costs are not to be excised from a lump sum compensation payment.
In the matter of Re Beadle and Director‑General of Social Security (1984) 6 ALD 1, the Tribunal, Toohey J presiding, indicated the following (at 3):
…
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
The Tribunal finds that there are no circumstances of a unique or unusual nature in this case that permits them to be described as special.. Accordingly, there are no grounds for exercising discretion favouring the applicant, to disregard the whole or part of the compensation payment pursuant to s1184K of the Act.
The decision under review is affirmed.
I certify that the eighteen [18] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr W.G. McLean, Member
(sgd) Olympia Sarrinikolaou
Clerk
Date of Hearing: 3 October 2003
Date of Decision: 12 December 2003
Advocate for the applicant: Self‑representedAdvocate for the respondent: Ms K. Navarro, Centrelink
0
3
0