Cawthorn; Secretary, Department of Family and Community Services - [2002] AATA 1137

DECISION AND REASONS FOR DECISION [2002] AATA 1137

ADMINISTRATIVE APPEALS TRIBUNAL )

) No T2001/145

GENERAL ADMINISTRATIVE DIVISION       )
           Re      SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Applicant
           And    DAVID ANDREW CAWTHORN
  Respondent

DECISION

Tribunal Mr J Handley (Senior Member)

Date5 November 2002
PlaceHobart

Decision      The decision of the Social Security Appeals Tribunal made on 16 August 2001 is set aside and in substitution IT IS DECIDED the primary decision of the applicant be reinstated.
  ..............................................
  Senior Member

ADMINISTRATIVE APPEALS TRIBUNAL      )
  )           T2001/145
GENERAL ADMINISTRATIVE DIVISION        )

ReSECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

AndDAVID ANDREW CAWTHORN

Respondent

Tribunal: Mr J. Handley (Senior Member)

Place: Melbourne

Date: 2 December 2002

DIRECTION [2002] AATA 1137

Having made a decision in this matter on 5 November 2002 and it was decided that:

"The decision of the Social Security Appeals Tribunal made on 16 August 2001 is set aside and in substitution IT IS DECIDED the primary decision of the applicant be reinstated."

The primary decision by a delegate of the applicant having been made on 2 May 2000:

"… to impose a compensation preclusion period between 25 December 1995 and 24 January 2010, and to recover $44,063.61 paid as disability support pension between 10 January 1996 and 25 April 2000"

Having found in paragraph 79 of my reasons for decision published on the same day that:

"… I am satisfied that a lump sum preclusion period must be calculated by reference to 50% of the sum of $695,000, being the compensation part of the lump sum compensation payment against the applicable income cut out amount (refer s. 1170). …"

Having found in paragraph 5 of my reasons for decision that the respondent was injured in 1993

Having considered correspondence from the solicitors for the applicant dated 5 November 2002 and 25 November 2002 and from the solicitors for the respondent dated 8 November 2002 regarding the issues whether:

the date of the commencement of the preclusion period should have been 25 December 1993 and not 25 December 1995; and

the lump sum compensation payment received by the respondent was $695,000 or $630,000.

I AM SATISFIED that there is an inconsistency between the decision and the statement of reasons, being an obvious error within the meaning of s. 43AA of the Administrative Appeals Tribunal Act 1975.

I DIRECT that the Registrar alter the text of the statement of my decision by deleting it and substituting the following:

"The decision of the Social Security Appeals Tribunal made on 16 August 2001 is set aside and in substitution IT IS DECIDED the respondent received a lump sum compensation payment of $695,000 and has a preclusion period for the period 25 December 1993 to 1 July 2009."

………Sgd Mr Handley……….
Senior Member

CATCHWORDS
SOCIAL SECURITY – Common law proceedings settled - Release recited payment not to be in respect of loss of earnings or lost earning capacity - character of lump sum payment – whether it was a contrivance – whether 50% rule applies – whether any special circumstances – decision set aside.

REASONS FOR DECISION

5 November 2002 Mr J Handley (Senior Member)

The applicant applies to review a decision made by the Social Security Appeals Tribunal (SSAT) on 16 August 2001.
The SSAT then reviewed a decision made by an officer of Centrelink on 2 May 2000 to impose a compensation preclusion period between 25 December 1995 and 24 January 2010, and to recover $44,063.61 paid as disability support pension between 10 January 1996 and 25 April 2000. On review by the SSAT, those decisions were set aside.
The hearing of this review was held in Hobart between 30 September – 2 October 2002. Mr Morgan appeared on behalf of the applicant and Mr Ayliffe appeared on behalf of Mr Cawthorn. Evidence was given by Mr Cawthorn. A number of documents were received into evidence and will be referred to in these reasons.
The circumstances giving rise to this application may be briefly summarised as follows.
Mr Cawthorn is presently 35 years of age having been born on 7 April 1967. On 11 December 1993, when he was then 26 years of age, he suffered horrific injuries in Hobart. The injuries were diagnosed as a fracture dislocation of T12/L1 vertebrae. Despite extensive and intensive treatment at the Royal Hobart Hospital and the Austin Hospital in Melbourne, Mr Cawthorn has not recovered any motor power sensation below T12 and has suffered permanent paraplegia of both lower limbs.
Mr Cawthorn commenced proceedings in the Supreme Court in Hobart against four defendants on 26 June 1997, claiming damages quantified at $2,160,616.69, together with reimbursement to Rehabilitation Tasmania, Medicare (Health Insurance Commission – "HIC"), MBF (a private health insurer) and "Commonwealth Pension" (Centrelink).
Those proceedings were eventually settled between the parties on 1 May 2000 when the applicant signed a release. The sum settled was $630,000 together with legal costs fixed and agreed at $65,000. The release (T21) purports to itemise and quantify components giving rise to the sum of $630,000.
Despite the Supreme Court proceedings claiming past and future economic loss and lost earning capacity, the release records the following in the final 3 paragraphs:
"(vi)The Releasees declare and assert that they do not admit liability to the Releasor in relation to the accident or the injuries he sustained in particular the Releasees have made no admission to the Releasor with respect to his claim for past or future medical costs or past or future lost earning capacity.
(vii)The Releasees acknowledge that the settlement sum is sufficient only to cover the Releasor's general damages, costs of future care, cost of equipment, cost of home renovations and swimming pool and legal costs.
(viii)The parties note no monies or damages have been or are to be paid or awarded wholly or partly to the Releasor in respect of lost capacity the Releasor has had or may have had to earn."
The position taken by the applicant was that the settlement sum includes a component for loss of earnings or loss of earning capacity. The payment therefore is a payment of "compensation". It follows that the 50% preclusion formula applies to the settlement sum and Mr Cawthorn is therefore not entitled to retain pension paid to him prior to the date of settlement and he is also precluded from receiving pension payments for a future period. Additionally it was put on behalf of the applicant that Mr Cawthorn was unable to demonstrate any special circumstances permitting the whole or part of the compensation payment as not having been made.
The Legislation
The SSAT relied on ss. 17, 1165, 1165(1A) and 1185 of the Social Security Act 1991 ("the Act") when it made its decision on 16 August 2001.
Act No. 71 of 2001, being the Family and Community Services Legislation (Simplification and Other Measures) Act 2001 ("the 2001 Act"), amended the Act, relevantly, with respect to compensation preclusion periods. Section 17 of the Act is unaltered, however, the transition provisions found at Clause 134 – being a substitution of Part 3.14 – modify and substitute the legislation relied upon by the SSAT.
The legislation which applies to this review is s. 17 of the Act and ss. 1168, 1169, 1170, 1178 and 1184K of the 2001 Act, which are reproduced as follows:
"17(1) In this Act, unless the contrary intention appears:
…
"compensation affected payment" means:
(aa)   an age pension; or
(a)     a disability support pension; or
(b)     a parenting payment; or
(c)     a social security benefit; or
(e)     a disability support wife pension; or
(f)     a carer payment; or
(g)     a special needs disability support pension; or
(h)     a special needs disability support wife pension; or
(i)     mature age allowance; or
(j)     mature age partner allowance; or
(k)     a former payment type;
"compensation part", in relation to a lump sum compensation payment, has the meaning given by subsections (3) and (4).
…
17(2) 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 that is:
(e)made wholly or partly in respect of lost earnings or lost capacity to earn;
(f)made either within or outside Australia. resulting from personal injury.
Note: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law.
17(2A) Paragraph (2)(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments.
…
17(3) 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 judgement 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 or 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 judgement 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."
"1168A provision of this Division that refers to a person receiving or claiming a compensation affected payment and receiving a lump sum compensation payment has effect regardless of whether the lump sum compensation payment was received before or after the person received or claimed the compensation affected payment."
"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.
(2)In this section:
lump sum compensation payment does not include a lump sum payment:
(a)to which section 1164 applies; or
(b)that relates only to arrears of periodic compensation payments."
"1170(1)     Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a)begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(2)If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(3)If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a)begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(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
(5)If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number."
"1178(1)     If:
(a)a person receives a lump sum compensation payment; and
(b)the person receives payments of a compensation affected payment in relation to a day or days in the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.
(2)The amount to be specified in the notice is the recoverable amount under section 1179."
"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.
(2)If:
(a)a person or a person's partner receives or claims a compensation affected payment; and
(b)the person receives compensation; and
(c)the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person's or the person's partner's receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1)."

The applicant's Submissions

Mr Morgan, made a detailed and comprehensive opening submission with respect to the contentions advanced on behalf of the applicant.
He pointed to the particulars of the claim lodged in the Supreme Court by Mr Cawthorn quantifying his claim for past economic loss at $82,800, his claim for future economic loss quantified at $330,423 and his claim for future loss of superannuation quantified at $56,500. The respondent also sought, by way of damages, loss of past superannuation, which was not quantified and damages cover to compensate for repayment of "Commonwealth pension".
In order to assist his submissions and to identify relevant documents, the applicant's solicitors provided a number of documents (additional to the T documents) which incorporate all of the pre-hearing documents, being Statement of Facts and Contentions of both parties, proofs of evidence, miscellaneous correspondence, income tax returns and correspondence between the parties in the Supreme Court proceedings. The latter documents were obtained before the hearing as a result of a number of summonses issued for the productions of the files held by the solicitors for the plaintiff and defendants in the Supreme Court proceedings. For ease of identification, the documents relied upon by the representatives in these proceedings found within the T documents will be described in these reasons as "TP" signifying the document as a T document and its page number. The documents found within the additional bundle provided by the applicant prior to the commencement of the hearing will be identified only as "P" being the page reference within that bundle.
In order to demonstrate that the respondent (at least initially) intended that his claim for damages incorporate a component for economic loss and lost earning capacity, Mr Morgan pointed to a letter of 3 June 1999 (P50) being a letter from the solicitors for the defendant to Mr Ayliffe requesting information of the "basis upon which the three gross annual income figures have been arrived at". That inquiry was apparently made because at the time of the injury, the respondent was the lessee of the Riverview Inn Hotel and there was some uncertainty concerning his income from that employment.
On 30 June 1999, a settlement conference was conducted between the representatives for both parties and Mr Cawthorn. A "record" of the conference is found at P55/56, apparently completed by the respondent's solicitor. Issues of liability were apparently discussed, but in so far as quantum of the claim was concerned, there were discussions initiated by the defendants' representatives that "a full range of opportunities, clerical, administrative work, are available for persons who have paraplegia". An offer of $100,000 plus costs was made and rejected.
The respondent's solicitor wrote to the solicitors for the defendant on 25 August 1999 (P57), indicating a willingness to pursue settlement negotiations and rejecting the defendant's assessment of contributory negligence.
On 30 August 1999 (P59), the respondent's solicitors wrote to the solicitors for the defendant explaining the respondent's calculations for the income lost. An amount was notionally calculated, having regard to the earnings Mr Cawthorn might have expected to receive from his self-employment at the Riverview Inn or the weekly sum payable on the probabilities to a hotel manager of the amount payable as an average gross weekly sum, having regard to data of the Australian Bureau of Statistics.
At P66, is a memorandum of notes prepared by Mr Ayliffe following another settlement conference in September 1999. The notes indicate that there were discussions initiated by the defendants as to the probability of a significant finding of contributory negligence. Apparently, there were also discussions concerning the quantum of a Centrelink repayment. Privately, there were discussions between Mr Ayliffe and Mr Cawthorn concerning the quantum of a counter offer and the estimates of risk that should be factored. The respondent made a further offer of $250,000 and following a private meeting between the defendants' solicitors a further counter officer was made by the defendants of $450,000.
On 5 November 1999, Mr Ayliffe wrote a 28-page letter to the solicitors for the defendant (P70/97 inclusive). The letter deals with issues of liability, contributory negligence and quantum. At P96, the quantum of the claim is specified. Reference is made to general damages and past and future economic loss. With respect to past economic loss, the letter records that "all claims are reasonable, with the exception of the claim of $10,000 for the purchase of a new motor vehicle". As to future economic loss, the letter records that a 15% contingency against future vicissitudes had not been factored and should be allowed. An offer of $1,000,000 "all in" was made by that letter which also discusses the liability of Mr Cawthorn for "repayments to Centrelink, MBF and Rehabilitation Tasmania".
On 13 March 2000, the solicitors for the defendant filed an offer of compromise in the Supreme Court in the sum of $670,000 inclusive of legal costs, noting that the plaintiff was responsible for repayments to the HIC, Centrelink and "any other government agency or department" (P11/13 inclusive).
Thereafter, the respondent's solicitor made a number of requests upon Centrelink for an estimate of the compensation part of a proposed lump sum and the probable period of preclusion from future benefit. The proposed gross lump sum amount was $750,000 and $800,000 (TP102 and 103). There had been earlier requests for similar information made in December 1999 with respect to lump sum amounts of $700,000; $550,000; $600,000 and $650,000 (TP93/99 inclusive).

On 24 March 2000, a telephone call apparently was conducted between Mr Ayliffe and the defendant's solicitor. The typed notes of that telephone call are found at P139 and a letter confirming an offer of settlement together with terms was sent on 27 March 2000 by Mr Ayliffe to the defendant's solicitors.
Prior to 24 March 2000, it is clear from the foregoing correspondence and other documents that the respondent approached quantification of his claim and compromise by including amounts for past economic loss, future economic loss and loss of earning capacity. Additionally, the respondent's liability for repayment to Centrelink and others was factored.
The typed notes of the telephone discussion of 24 March 2000, made by the solicitor for the defendants, records the following:
"GIO Cawthorn 24 March 2000.
Rang Bill A .. Returned his call.
In principle $695,000.00 subject to structuring settlement as follows.
Judgment $ … plus $… costs + notation nothing for industrial capacity + Release ? $695,000.00.
$65,000 legals.
$150,000 generals care $695,000.00.
Balance for claim for Plaintiff is disputed.
For a full release.
We want to argue with Centrelink – will take that to SSAT – agree you will pay first to Centrelink.
MBF – We want to argue with them they have wide exception re future medicals.
Misleading we will take to Federal Court only insurer with such wide exception relating to settlements/judgments.
A Mills advised;
In principle no objection, send it to me in writing and I will take instructions from both defendants."

The letter of 27 March 2000 apparently in response to the invitation following the telephone call of 24 March is found at P119 and is in the following terms (omitting relevant parts).
"I confirm my client has instructed me to settle for $695,000.00 all in subject to as a condition precedent to settlement the following:
1.There be Judgment in the Supreme Court against all Defendants in the sum of $630,000.00 together with costs agreed in the sum of $65,000.00; and
2. There be a Release which recites:
(a)That the Plaintiff has made a claim by reason of injuries occurring on or about the 11th December, 1993;
(b)That the claim is particularised at $2,160,616.69 and the Plaintiff has advised that the particulars to some Heads of Damages would be increased were the matter to go to trial.
(c)That the Plaintiff claims general damages would were the matter to go to trial be in the vicinity of $150,000.00
(d)The Plaintiff particularises the claim for care and domestic services at $52,143.00 but has advised that that claim were the matter to go to trial would be in the vicinity of $200,000.00 and would be reparticularised.
(e)The Plaintiff claims for wheel chairs, sports wheel chairs, motorised wheel chair, maintenance, slide board, standing frame, bed and miscellaneous future appliances, devices and equipment a total of approximately $100,000.00.
(f)The Plaintiff claims for future home modifications an allowance for a swimming pool and related expenses about $200,000.00.
(g)The Plaintiff's legal costs are at least $65,000.00.
(h)That for the purposes of settling the claim the Defendant offers the sum of $695,000.00.
(i)The parties agree that the above specific particulars referred to in paragraphs (c),(d),(e),(f) and (g) account for the sum offered.
(j)The parties agree that the sum offered if accepted does not provide funds over and above the abovementioned particulars and in particular does not provide funds for lost earning capacity or past or future medical expenses.
(k)That in return for the sum the Defendant releases the Plaintiff from all causes of action he has against any of the Defendants arising out of or in any way connected with the accident; and
(l) The parties agree to enter a Judgment in the Supreme Court finalising the litigation in the sum of $630,000.00 together with agreed costs of $65,000.00.
Yours faithfully
AYLIFFE & AYLIFFE"

Subsequently, the solicitors for the defendant agreed "in general terms" to the terms of settlement proposed by the letter of Mr Ayliffe of 27 March 2000.
The release was signed on 15 May (TP126).
The last four paragraphs of the release are recorded as follows:
"(v)The Releasor indemnifies each of the Releases against liability to any person, firm or company in respect of any loss or damage arising out of the accident and the Releasor's injuries and the Releasor further indemnifies the Releasees against any liability to any person, firm or company in respect of any claim or action from which the Releasor has by this Deed released the Releasees. In particular and without limiting the foregoing, this clause applies to the Health Insurance Commission, Centrelink and MBF.
(vi)The Releasees declare and assert that they do not admit liability to the Releasor in relation to the accident or the injuries he sustained in particular the Releasees have made no admission to the Releasor with respect to his claim for past or future medical costs or past or future lost earning capacity.
(vii)The Releasees acknowledge that the settlement sum is sufficient only to cover the Releasor's general damages, costs of future care, cost of equipment, cost of home renovations and swimming pool and legal costs.
(viii)The parties note no monies or damages have been or are to be paid or awarded wholly or partly to the Releasor in respect of lost capacity the Releasor has, had or may have had to earn."
Mr Morgan submitted that the settlement as structured and as evident by the release, amounts to a contrivance. Additionally, it was put that a letter forwarded by the respondent's solicitors to Centrelink (TP135/136) perpetuated the structuring of the release to cause the contrivance by representing that there was "no allocation of funds was for lost earnings or lost earning capacity. Settlement was agreed on this basis because of significant difficulty associated with the issue of liability."
Mr Morgan then pointed to the applicant's proof of evidence, (page 4) where Mr Cawthorn recorded that his claim for loss of earnings was "subject to two substantial difficulties", namely he was faced with claims by the defendants that he was able to work into the future, and secondly that his employment at the time of accident was not producing profit. Mr Cawthorn recorded that there was a "substantial risk I had of losing" and he "could not afford to take this case to trial". Mr Cawthorn then recorded that he was "very concerned that the settlement funds were insufficient to cover my needs for the rest of my life", and by reason of the funds "not sufficient to cover my general damages, housing costs, care, wheelchair expenses, expenses for other equipment and the medical expenses that I would have to incur during the rest of my life". There was nothing "left over for lost earning capacity". Faced with the difficulties he perceived in not establishing loss at the date of accident and the claims of the defendant that he had a capacity to earn into the future, Mr Cawthorn recorded "it seemed reasonable and the defendants agreed that it would be noted that the defendants had not paid me monies for lost earnings. I wanted to contest with Centrelink the repayment to Centrelink and the preclusion period. In the circumstances that seemed to me to be fair and reasonable". Later (page 5) he recorded "Because I was settling so far short of my claim, it was very important to me to preserve my position so far as arguing my position with Centrelink was concerned. It was a condition of settlement that the money be paid to me for other than lost earnings. The notation in the Release was important to me and part of the settlement". He concluded upon this issue "I instructed my solicitor to take all reasonable steps to ensure that I did not have to unnecessarily pay out of my damages monies to the Commonwealth that were not legally owed. In deciding to accept the settlement in the sum of $695,000.00 (including costs) I took into account that I would be able to appeal the decision of the Commonwealth with respect to the repayment of the disability support pension of $44,963.61".
In support of his contention that the settlement was a contrivance and was structured so as to appear that no monies were paid for lost earning capacity, Mr Morgan relied on the decision of Secretary, Department of Social Security v a'Beckett (1990) 21 ALD 79 ("a'Beckett"). At page 90 Von Doussa J recorded:
"In the present case the evidence of the respondent and his solicitor could throw little light on the defendant's reasons for making the payment.   There is no reason arising from the objects of Pt XVII of the Social Security Act which would make the views of the pensioner and his solicitor any more significant than those of the party making the payment in settlement of the claim.    On the contrary, in many cases there may be reason to suspect that the pensioner's evidence could be less than objective about the component parts of a settlement.   The difficulties which may arise if primary attention is given to the pensioner's statements as to the components of a global settlement or even to statements formally recorded in documents signed by both parties to the settlement, have been adverted to in the secondary material connected with the Bills to amend the Social Security Act introduced in parliament in 1979 and 1988 to which reference is made in Secretary, Department of Social Security v Banks, supra.   Unfortunately experience has shown that such statements are at times incapable of rational explanation and are the product of "manipulation" by the parties to obscure the true position.
This is not to say that the evidence of the parties as to the course of negotiations is irrelevant.   It is not, but it is only a part of the total picture, and often it will be of little assistance in determining if any part of a payment made in settlement of a claim is in part a payment in respect of an incapacity for work.
Usually the more objective evidence available about the nature and extent of the injury, and the events which followed it, for example the duration of absences from work, actual loss of wages, changes in work activity and the like, will provide a more reliable guide than the asserted beliefs of the claimant as to how the settlement sum was arrived at.   Ordinarily, statements by the claimant asserting a loss resulting from an impaired capacity for work made in circumstances where those statements can reasonably be regarded as having been made to influence a defendant to pay will be entitled to substantial weight.   Foremost amongst such statements will be formal particulars of claim.   The formal particulars of claim identify the subject matter of the claim presented by the pensioner."
Mr Ayliffe, on behalf of Mr Cawthorn, submitted that neither the release signed by his client, nor the negotiations between the parties or the terms of settlement were a contrivance. He said the settlement was consensual, it amounted to a contract and was openly and honestly negotiated between his client and the three defendants in the Supreme Court proceedings. He said that it was of "substantial significance" that the solicitors for the defendants had not been called by the applicant, nor any representatives of the insurers who were all accessible to the applicant. He submitted that the solicitors and the insurers were highly reputable and nothing will be shown by the evidence establishing that these persons or these corporations would engage in a contrivance to assist a party who brought proceedings against them. This, he said, was a "inherently unlikely scenario".
It was submitted that the terms of settlement reflected a belief on the part of Mr Cawthorn, (consistent with the submissions made by the defendants in prior settlement conferences) that proving lost earnings for the past and the future would be difficult by reason of the applicant's capacity to earn and employment opportunities available to him. Additionally, it was known that the applicant had been operating the Riverview Inn at a loss and could therefore not point to profit prior to the injury. Mr Ayliffe further submitted that the defendants had made an offer of compromise of $670,000 inclusive of costs. He said that the subsequent negotiations and the offer to settle, without reference being made to any payment for lost earning capacity, was obviously thought appropriate by the defendants because they subsequently increased their offer to $695,000.
Mr Ayliffe submitted that eventually the claim was settled for general damages only. He said that components of the release, as claimed by his client, were supported by evidence. Further the terms of settlement should be distinguished from the "normal run of cases" where damages for lost capacity to earn represents the "lion's share of judgment".
He submitted that the deeming by the Act of 50% of settlements being representative of lost earnings or lost capacity to earn is a "fair and just rule of thumb", however in the present case the section should not apply. It was submitted that in the context of his client, who is a paraplegic and where there is no evidence that his client has "double dipped", it would not be fair and just to regard the present application as one of the ordinary.
It was submitted that if Mr Cawthorn is not entitled to a refund of the monies prepaid to Centrelink and if he is not entitled to future Centrelink payments, he will not be able to pay for future care and his capital investments will be eroded.
David Andrew Cawthorn
Mr Cawthorn was called by Mr Ayliffe and gave evidence. He adopted his proof of evidence and the attached exhibits found at page 145/237 of Exhibit A. He said the proof of evidence was true to the best of his recollection and belief.
Mr Cawthorn said that the representatives of the defendants were adamant during settling conferences that he was able to work and had a capacity for employment into the future. He understood that they denied his claim for loss of earnings and lost earning capacity. He was referred to a vocational rehabilitation specialist in Hobart and it was his belief that the specialist had reported that he was well presented, articulate and that there was no reason why employment could not be found.
In cross-examination, Mr Cawthorn was taken to tax returns and profit and loss statements lodged in 1993 and 1994, following his lease of the Riverview Inn. Mr Cawthorn said that he had purchased a Suburu motor vehicle, second hand for approximately $10,000 and some payments with respect to the vehicle were made from the accounts of the hotel. In August 1994, he sold that vehicle and purchased a new BMW motor vehicle at a cost of $50,000. He said this was partly financed from the sum of $120,000 he received as a lump sum from a disability insurance policy which was realised shortly after his accident. He acknowledged that the payment of $120,000 was not referred to in his proof of evidence because he did not think it was necessary and he had not raised it with his lawyers. Mr Cawthorn said that he paid $30,000 from the sum of $120,000 towards the purchase of the car and took out a loan of $20,000 repayable over 4 years to meet the balance of cost. He acknowledged that he had purchased a new motor car and had taken out a loan at a point in time when he was not working and when it was unlikely that he would return to the hotel industry. He said that the instalments were financed from the balance of the lump sum disability payment and from income he received under the policy which was paid to him at $2,000 per month over two years. The balance of the $90,000 left after the payment was made towards the motor car. Also, he said he has now expended money on modifications to his parents' home (where he continues to reside), repayment of loans to his parents and upon clothing, shoes, medical supplies, wheelchairs and drugs.
The applicant was then taken to the 1993/1994 tax returns, which he said were incorrect. He noticed in the week prior to the hearing (when he read the documents) that certain items of expenditure had been omitted, namely licensing fees and power costs and said that the description of "rent" and "wages" was either incorrect or had been understated.
Mr Cawthorn said that the lease of the hotel was surrendered a short time after the accident and the partnership – of which he was member – which held the lease was dissolved. He said he received $20,000 upon surrender of the lease. Mr Cawthorn acknowledged that that sum also was not referred to in his proof of evidence. He said that it had been expended on meeting accounts associated with the hotel.
Some years after the accident Mr Cawthorn acknowledged that he did attempt work in companies owned by his father known as "Network Projects Pty Limited" and "Aviation Video Pty Limited". The work principally involved clerical and administration duties undertaken when his father was overseas. Mr Cawthorn acknowledged that he applied for a credit card at or about that time and disclosed Aviation Video Pty Limited as his employer. He said that salary was not paid, but in return he received free board, use of telephone and meals from his parents.
Mr Morgan then took Mr Cawthorn through his Statement of Claim found at T13. This document was lodged with the Supreme Court and initiated his common law proceedings. The claim for income loss between the date of injury and the date of issue of the Statement of Claim was calculated at $82,800 based on anticipated income from the Riverview Inn of $450.00 per week. The Statement also records a liability accepted by Mr Cawthorn to reimburse payments to Centrelink which were then being received at $378.20 per fortnight.
Mr Cawthorn was then taken to every item of claim remaining in his statement of claim extending to the cost of and claim for past and future care, wheelchair and wheelchair hire, pharmaceutical, medical, hospital, travel, motor car, home modifications, gymnasium, clothing, energy costs, telephone and car cleaning. All amounts claimed were said by Mr Cawthorn to be reasonable, were amounts that he had either paid or would be liable to pay and were amounts that he expected to recover from the Supreme Court proceedings.
With respect to the settlement conferences, where Mr Cawthorn said that there were discussions initiated by the defendant concerning their attitude to his claim for past and future economic loss, Mr Cawthorn said that he understood the difference between a reduced capacity to earn and an absence of any capacity to earn. He said the former related to a person having a potential to work and earn, whereas the latter referred to a person having no capacity at all. He said that the defendants' solicitors during the settlement conferences had said that he had a capacity to earn income, and had not ever said that he had no capacity at all. It followed – and Mr Cawthorn agreed – that the defendants' solicitors were asserting that whilst there might be an entitlement to damages for some economic loss – past and future – they were not asserting that he had no entitlement at all.
Having regard to the items of loss – past and future – which were being claimed, Mr Cawthorn agreed with Mr Morgan that any offer of settlement - if made – would be on the basis of the items and amounts that were claimed. Mr Cawthorn agreed that he continued to assert during all pre-trial stages that he was totally incapacitated and was claiming for economic loss as a consequence, yet in this review he agreed that he was not totally unemployable. He said that Mr Ayliffe agreed with him during private discussions that it was likely that the defendants' assertions of an ability to earn in the future would be found by the Court and the formulation of counter offers by him recognised the likelihood of damages being recovered in an amount less than the sum being claimed.

Whilst the discussions initiated by the defendants' solicitors concerned future earning capacity, Mr Cawthorn acknowledged that the defendants' solicitors did not ever dispute the claim for past loss, which was quantified in the statement of claim at $82,800.00.
In December 1999, the defendants offered $540,000, plus costs and a counter offer of $780,000, plus costs was made. Mr Cawthorn agreed that the offer made by the defendant and the counter offer made by his solicitor would have had regard to his claim for damages for income loss and neither offer specified that the claim for economic loss and lost earning capacity had been abandoned. Additionally, Mr Cawthorn acknowledged that when the counter offer of $780,000 was made, he understood that he would then be responsible for repayments to Centrelink, MBF, HIC and legal costs.
The offer of settlement which was ultimately accepted by the defendant was communicated by Mr Ayliffe to the defendant's solicitors on 27 March 2000 (P119/120). Mr Cawthorn said that the offer then made was by his initiation and was regarded by him as being a "global figure". He said he realised that if the offer was accepted it would be in full and final settlement of his Supreme Court proceedings. He said that he made calculations of the probable future costs that would be incurred.
Mr Cawthorn said in answer to questions from Mr Morgan that the offer made by him took account of the risk of a finding of contributory negligence, yet no discount was made by him in the quantification contained in the letter of 27 March 2000for general damages. Further, Mr Cawthorn agreed that the items identified at paragraphs (d), (e) and (f) were not explained by the letter, nor did he provide any basis to justify a departure from the amounts claimed in the Statement of Claim to the amounts subsequently put by way of offer on 27 March 2000.
Mr Cawthorn said that he "structured" the offer made on 27 March 2000 because he understood – having heard assertions made by the defendants' representatives in earlier conferences - that he was unable to claim for loss of earning capacity. He then approached his solicitors and instructed them to make the offer as quantified.
When asked whether Mr Cawthorn believed that if his terms of settlement did not disclose any payment for economic loss that he might not have to repay monies to Centrelink, Mr Cawthorn said that he was "not sure at that time". He said that he believed that he "had no claim for economic loss because of what the defendant had said and I thought I could work in the future".Mr Cawthorn was then asked to note that he had apparently abandoned his claim for past and future economic loss, but had not pursued by the offer of 27 March any claim for past or future medical expenses. When asked whether by making an offer of $695,000 in the terms of the letter of 27 March 2000, he was attempting to avoid repayments to all agencies, Mr Cawthorn said "not exactly - I knew I had to pay something but I wanted to plead my case and get a good hearing". Mr Cawthorn said that he was concerned throughout the latter stages of negotiation that repayments to all agencies might be expected, however the view that he said he preferred to "plead a case to Centrelink and I understood it would be easier to avoid repayment if I got nothing for economic loss". Later, he said, "I believed if the release said nothing about economic loss it would make it easier to argue for no repayment". Similarly, he said the same considerations applied with respect to repayments to HIC and the private health insurer.
At the present time, Mr Cawthorn said that he has $359,000 invested, which is paying him a regular income. Initially, approximately $400,000 was invested, but approximately $40,000 has been "lost" through some investments "not performing", a reduction in the value of some shares due to the aftermath of the September 11 tragedy and fees to his advisers. At the present time, Mr Cawthorn said that he has regular weekly expenses associated with the running of his motor car, his mobile telephone, gymnasium and recreation. It is his intention ultimately to own his own home which, he said, will cause him to incur considerable costs because it will need to be specifically modified. He said he had not inquired into obtaining a mortgage to finance the cost of the home (thereby permitting him to retain his investment) because he did not know whether he could service loan repayments. Additionally, he had not considered subletting part of any home that he purchases in order to obtain additional income.
In re-examination, Mr Cawthorn said that it would not be realistic to obtain a boarder or lodger in any home that he purchases. Such a person would need to be tolerant and understand his needs, particularly on the occasions when by reason of the effect of paraplegia he is unable to control his bowel or bladder and he is in need of assistance. Additionally, Mr Cawthorn said that it was important for him to have a BMW motor car because it is reliable and he did not want to be "stranded" in the event of breakdown. Further to this, he said it was important to have a mobile telephone in the event of emergency and to permit him to communicate with his friends.
When pressed on the issue of having a BMW motor car, he said it was regarded as being a safe and reliable car with wide doors which permits adequate access for his wheelchair, which he lifts from a road way into the vehicle.
With respect to the monies invested, Mr Cawthorn said that he does not gamble, he has no acquired luxuries and does not live a luxury life. His assets presently comprise monies invested, the BMW motor car and a wheelchair. With respect to his memory and understanding the settlement negotiations, Mr Cawthorn said that it was a "big concern" for him in the negotiations that he would not be able to prove any profits from the Riverview Inn. He said that he thought that the questions asked of him by the defendants' solicitors during the settlement conferences were not confined to future economic loss, but were of a general nature and embraced his claim for past economic loss.
Conclusion and Reasons for Decision
In Re Secretary, Department of Social Security and Banks (1990) 20 ALD 19 Von Doussa J summarised a history of amendments to the Social Security Act 1947 where the Federal Parliament intended, by the amending legislation, to prevent persons who had recovered a compensation lump sum from avoiding the repayment of social security payments made prior to the recovery of the lump sum. He also summarised the development of the "50%" rule where part of the lump sum settlement was applied to a formula to preclude persons from receiving social security benefits for a future defined period.
At paragraph 13 of his decision, His Honour recited part of a Second Reading Speech delivered on 13 April 1988 where, in the Introduction of an amendment to the Social Security Act, (Act No. 58 of 1988) the relevant Minister – in describing the intention of the amending Act said:
"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% of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect to that proposal."

His Honour – having referred to the above passage - decided:
"The mischief is clearly identified as the abuse of the earlier provisions which had come about through settlements being manipulated to obscure the economic loss component in the compensation payment."

Von Doussa J made similar comments in his subsequent decision of a'Beckett (refer earlier). When Banks was decided, s. 152(2)(c)(i) applied. It then read:
"In this Part –
…
(c)a reference to the compensation part of a lump sum payment by way of compensation is a reference to –
(i)if the lump sum payment was made (whether with or without admission of liability) in settlement of a claim that is, in whole or in part, related to disease or injury and –
…
50% of the lump sum payment;"

Whilst s. 17(2) of the Act defines "compensation" as a payment of damages made wholly or partly in respect of lost earnings or lost capacity to earn, only s. 17(3)(b) contains a reference to a payment, that is, "in the Secretary's opinion" referable to lost earnings or lost capacity to earn. Section 17(3)(a) and (ab) do not contain such a reference.
In his discussion of s. 152(2)(c)(i), Von Doussa J at paragraph 19 in Banks said:
"The provisions of s 152(2)(c)(i) apply where a lump sum payment was made in settlement of a claim "that is, in whole or in part, related to disease or injury …". The wide scope of subpara (i) is further emphasised in the definition in para (a) of a "payment by way of compensation" which extends to any of the specified kinds of payment that is "in whole or in part, in respect of an incapacity for work". If a payment in settlement of a claim has these characteristics, the total amount paid, which comprises the "lump sum", becomes subject to the arbitrary formula of subpara (i) to determine "the compensation part of the lump sum payment by way of compensation". Thus, subpara (i) will apply to the total amount paid in settlement of a claim if the amount paid is in some part in respect of an incapacity for work and if the claim relates to some part to disease or injury. This will be so even though the lump sum also clearly includes amounts for heads of loss which are unrelated to incapacity for work, eg, for pain and suffering, for disfigurement, or for future medical expenses in relation to disease or injury. This will also be the case where the lump sum payment is in settlement of a claim which includes a head of loss that is unrelated either to incapacity for work or to disease or injury, eg, a component for property damage."

The language adopted in s. 152(2)(c)(i) is similar to the provisions of s. 17(3). The intention of both sections is certainly obvious and the analysis of s. 152(2)(c)(i) as provided by His Honour is no less relevant to an analysis of what is intended to be the compensation part of a lump sum as found within s. 17(3) of the Act.
Whilst the introduction of the 50% rule is intended to avoid abuse of the Act by deeming that monies recovered will be applied to a formula to preclude future payment for a specified period, it has the added intention of deterring persons from arguing that the whole or part of a settlement of a compensation settlement should not be applied to the preclusion formula. This is because the imposition of the 50% rule deems the compensation part of a lump sum compensation payment to be in whole or in part related to the disease injury or condition which gave rise to the proceedings. It is not referrable only to a payment, which is made with respect to lost earnings or lost capacity to earn. "Compensation" is defined as being referrable to lost earnings or lost capacity to earn but the 50% rule applies only with respect to the "compensation part of a lump sum compensation payment". For the purposes of the present application s. 17(3)(a) makes no reference at all to payments with respect to lost earnings or lost capacity to earn.
In her discussion of the Social Security Act 1991 as it applied at February 2002, Kiefel J in Re Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 said at paragraph 24:
"Unlike a presumption, which may be rebutted by evidence, the purpose and effect of a deeming provision is to prevent any attempt, by either party, to prove the truth …"

A combination of the language of the Minister's Second Reading Speech as recited in Banks (where the word "deemed" is specifically mentioned), the language of His Honour in Banks and the similarity between s. 152(2)(c)(i) and s. 17(3)(a) dictate that 50% of a compensation lump sum is deemed to be the payment where the settlement sum is paid in respect of disease, injury or condition in whole or in part. Whether the payment is in respect of loss earnings or lost capacity to earn is not relevant to a payment within the ambit of s.17(3)(a).
In Re Secretary, Department of Family and Community Services v Sammut [1999] FCA 1735 ("Sammut") Branson J reviewed a decision of the Tribunal where the department sought to recover from a lump sum compensation payment the sum of $7,965.83 being job search allowance and sickness allowance. The proceedings were apparently settled in the sum of $56,500 where the solicitor for Mrs Sammut notified Centrelink that the settlement sum "had been agreed to by her client on the basis that he did not include any amount as compensation for economic loss". The solicitors for the insurers subsequently notified Centrelink that they regarded $1,300 of the settlement sum as being for economic loss.
Her Honour was then reviewing a decision of this Tribunal which in its examination of whether special circumstances applied to the applicant so as to regard part of the compensation monies as not having been paid, discussed "the legal process surrounding Mrs Sammut's consent to compensation settlement" and concluded that that process had "not served her interest". The Tribunal had found that "processes undertaken by her solicitors may have been insufficient" and eventually found that there were special circumstances because any "legal redress against her solicitor" would cause her further cost and would not eventually bring the proceedings to an end. The Tribunal specifically found that "special circumstances" existed and arose from the failure of Mrs Sammut's solicitor to negotiate a settlement in which "economic loss" as a component was clearly excluded.
Her Honour noted that the appellant department "directed strong criticism to the approach taken by the Tribunal in considering whether the case was one in which there was special circumstances" and concluded at paragraph 26:
"Nonetheless, I consider it appropriate to observe that it would be inconsistent with a solicitor's ethical responsibilities to seek to clothe a compensation payment made to his or her client with a false character for the purpose of evading the operation of the Act. That is, if to a solicitor's knowledge a compensation payment was made wholly or in part in respect of lost earnings or lost capacity to earn (s 17(2) of the Act), it would not be ethical for him or her to seek to obtain from the paying party a written statement that the payment did not include any economic loss component for the purpose of assisting his or her client to avoid the operation of Part 3.14 of the Act (which is concerned with compensation recovery)."

I have concluded that the compensation part of a lump sum compensation payment, as defined, in s. 17(3)(a), is exclusive of consideration of whether the payment is in respect of lost earnings or lost capacity to earn because of the language of the section and its construction. In the present case, the payment made to Mr Cawthorn was made without admission of liability in settlement of his claim that was in whole or in part related to a disease, injury or a condition and it was settled not by "consent judgment being entered in respect of the settlement" but rather by written release. Therefore, it was a settlement encapsulated by the word "otherwise" as that word appears in this subsection. Subsection 17(3)(a) concludes with the word "or". It does not conclude with the word "and". Section 17(3)(ab) does not apply because it refers to entitlement to and receipt of periodic compensation payments. Payments of this type were not sought nor recovered in the Supreme Court proceedings. Subsection 17(3)(b) commences with the words "if those circumstances do not apply …". Because I am satisfied that the "circumstances" as found within section 17(3)(a), do apply, 17(3)(b) does not require consideration.
In fairness to both parties, the distinction I have discussed above between the sub-sections of s.17(3) was not specifically addressed nor contained in submissions at the hearing. However upon an analysis of section 17(3)(b) alone, it is strongly indicated that there was an attempt by the respondent or his solicitors to "seek to clothe the compensation payment made to his or her client with a false character for the purpose of evading the operation of the Act" (refer Sammut). I would say also that the solicitors for the defendant in the Supreme Court were complicit in that manoeuvre by consenting to a term of a written release that the payment did not include any component for economic loss, thereby assisting Mr Cawthorn in his attempts to avoid the operation of the legislation. Mr Cawthorn said he initiated the terms of the proposed settlement and instructed his Solicitors to put those terms to attempt compromise. This would be remarkable. Mr Cawthorn did not qualify himself as having legal skills or knowledge of the operation of the Act. Despite what Branson J decided in Sammut, the terms of the offer as eventually were acceptable to both parties were mischievous and were put by Mr Cawthorn's Solicitors to achieve the best financial position for his client. This is consistent with a Solicitor's professional responsibilities, but not by a manoeuvre or device which is at worst, illegal, or at best reckless.
The Supreme Court proceedings which were initiated by Mr Cawthorn were comprehensive and detailed in the description of the compensation being sought. Reference was specifically made to past loss of earnings, future loss of earnings and loss of earning capacity.
At all times prior to 24 March 2000, the Supreme Court proceedings were being pursued and negotiated upon the basis that Mr Cawthorn was attempting to recover damages with respect to past and future economic loss and lost earning capacity. This is evident from the negotiations between the parties which were documented and found within the documents lodged by the applicant and referred to earlier. It was also evident by the requests made by Mr Cawthorn's solicitors to obtain an estimate from Centrelink of the probable preclusion period where estimates of the lump sum likely to be recovered were notified to Centrelink. At no time was Mr Cawthorn's Supreme Court claim amended to delete any claim for economic loss nor did he ever abandon (in those proceedings) his claim for past and future economic loss or loss of earning capacity.
On 13 March 2000, the solicitors for the defendant made an offer of compromise in the Supreme Court in Tasmania which specifically recited as a term of the proposed compromise, that the plaintiff (Mr Cawthorn) would remain responsible for repayments to the HIC, Centrelink and "any other government agency or department". The representatives for the parties in the Supreme Court proceedings then commenced to negotiate on the basis that the claim of the plaintiff would be described in a fashion to exclude or avoid reference to past and future economic and lost earning capacity. On the one hand, the advantage to the defendants when the matter was eventually settled upon this basis was that the claim had an end, their risk was eliminated and they paid the additional sum only of $25,000 to the offer of compromise previously made of $670,000. From the point of view of the plaintiff, despite having made counter offers previously of greater amounts, but accepting responsibility for repayments, it was intended that from the sum of $695,000 which included the sum of $65,000 for costs, he would recover $630,000 nett. Settlement on these terms would permit him to retain the sum of $44,063.61 which was the liability imposed by Centrelink. In effect, this was the equivalent of a net recovery of $674,063.02.

It was clearly understood by the solicitors for Mr Cawthorn that there would be a liability to Centrelink (refer notes of discussion between solicitor for Mr Cawthorn and defendant solicitor 24 March, p139) because he acknowledged that there would be an argument with Centrelink - "we'll take that to SSAT". The position clearly then adopted was to strengthen the argument to avoid the 50% rule by having the defendant "agree" in the release that no payment was made in respect of lost earning capacity.
Additionally, the respondent sought to quantify his counter offer of $695,000 inclusive of costs by relying on certain heads of claim which were quantified. The amounts then quantified against the claim then being made bore no resemblance at all to the amounts initially claimed in the Statement of Claim and I am satisfied it had no basis in fact. The letter, in my view, was no more than a device attempting to establish that the plaintiff was concerned only to claim for certain heads other than past and future income loss and loss of earning capacity. Further, it was intended to be used in the event of any anticipated proceedings before the Social Security Appeals Tribunal.
The folly of the contents of the letter of 27 March 2000 may also be explained by the apparent absence of the respondent making any claim for past medical expenses. Further despite his belief that there was a risk of a finding of contributory negligence, no discount was made in the claim for general damages sought by the common law proceedings which was recited in the same amount in the terms of the settlement.
Accordingly, I am satisfied that a lump sum preclusion period must be calculated by reference to 50% of the sum of $695,000, being the compensation part of the lump sum compensation payment against the applicable income cut out amount (refer s. 1170). It follows that a compensation affected payment of disability support pension is not payable throughout the preclusion period (s. 1169). Further, the respondent is liable to repay compensation affected payments which have been made within the lump sum preclusion period (refer s. 1178).
The issue then remaining is whether the Secretary may disregard the whole or part of a compensation payment as not having been made or not liable to be made if there are special circumstances (refer s. 1184K).
In Re Beadle and Director-General of Social Security (1983) ("Beadle") 6 ALD 1 at 3, the Tribunal at paragraph 12 decided as follows:
"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."

In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 ("Groth"), Kiefel J at paragraph 12 decided:
"The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case - and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."

It was argued in the present case that the circumstances of Mr Cawthorn were "special" because he will be required to purchase private accommodation of his own which would deplete most of his present funds and he will be exposed to considerable future medical costs. Additionally, it was put that he has costs associated with his motor car, his mobile telephone and gymnasium all of which contribute to financial insecurity.
The injuries suffered by Mr Cawthorn are appalling and shocking, as is his relative immobility and his dependence upon others. He will no doubt incur future costs which are out of the ordinary, but they are consistent with his needs both present and future. He instituted common law proceedings to recover damages and chose to settle in the sum of $695,000. Having regard to the circumstances which gave rise to his injuries, it is hardly surprising that he faced a considerable finding of contributory negligence. In deed, it would not be beyond possibility that he was facing a finding of the defendants having no liability. Nonetheless, the quantum of his damages is not of itself a special circumstance when applied to his present and future needs. He presently has $359,000 invested, from which he receives a regular income. He presently resides with his parents and has modest charges for board and accommodation. Whilst I recognise that the preclusion period imposed is of a considerable duration, that of itself is not a special circumstance, because it is imposed by legislation. It may be that within the preclusion period his financial or economic needs will have deteriorated and he may then be able to establish special circumstances. However, by regard to his present investments and income it cannot be said on the basis of Beadle or Groth that his circumstances are presently "unusual, uncommon or exceptional". Nor can it be said that by his circumstances "something unfair, unintended or unjust has occurred", thereby giving his circumstances "some feature out of the ordinary".
Having regard to the present circumstances of Mr Cawthorn, which are not "special", I am unable to find that the whole or part of his compensation payment should be treated as not having been made.
It follows that the decision of the Social Security Appeals Tribunal must be set aside and the decision of the authorised review officer made at first instance be reinstated.
I certify that the 86 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Handley (Senior Member).
Signed:         Katherine Navarro..................................
  Associate
Date/s of Hearing  30 September, 1 and 2 October 2002
Date of Decision  1 November 2002
Counsel for the Applicant        Mr Morgan
Solicitor for the Applicant         Australian Government Solicitor
Counsel for the Respondent    Mr Ayliffe
Solicitor for the Respondent    Ayliffe & Ayliffe