Channell and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 460

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 460

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/3640

GENERAL ADMINISTRATIVE DIVISION		)
Re		ALISTAIR CHANNELL

Applicant

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

Respondent

DECISION

Tribunal Mr A Sweidan, Senior Member

Date28 May 2008

PlacePerth

Decision The Tribunal affirms the decision under review.

............[Sgd Mr A Sweidan]........

Senior Member

CATCHWORDS

Social Security – whether amount was a lump sum compensation payment – decision under review affirmed

LEGISLATION

Social Security Act 1991 (Cth) s 17(2); Part 3.14 s.1170; s1184K(1)

CASES

Baker and Secretary, Department of Social Security (1990) AATA 5690

Secretary, Department of Social Security and Duzevic (1996) AATA 10752

Beadle and Director-General of Social Security (1984) AATA 1548

Dranichnikov and Centrelink (2003) FCAFC 03/133

REASONS FOR DECISION

28 May 2008 Mr A Sweidan, Senior Member    

BACKGROUND

1.      Applicant (“Mr Channell”) seeks a review of the Social Security Appeals Tribunal (‘SSAT’) decision made on 10 July 2007 that affirmed the decision made by a Centrelink Authorised Review Officer (‘ARO’) on 25 November 2005 that Mr Channell was subject to a lump sum preclusion period from 5 October 1999 to 14 January 2002, and to recover Disability Support Pension (‘DSP’) in the amount of $12,134.33 paid for the period 19 October 1999 to 14 January 2002.

ISSUES FOR THE TRIBUNAL

2.      Whether Mr Channell received a lump sum compensation payment that precluded him from receiving compensation affected payments (‘CAP’) during the period 5 October 1999 to 14 January 2002.

3.      If yes, whether the recoverable amount in respect of Mr Channell’s lump sum preclusion period is the amount of $12,134.33,  being the total of the DSP paid to Mr Channell during the period 19 October 1999 to 14 January 2002.  

4.      If yes, whether the amount of $12,134.33 is a debt due to the Commonwealth that must be recovered.

5.      If yes, whether there are special circumstances that would make it appropriate to disregard all or a part of the lump sum payment of compensation received by Mr Channell.

FACTS

6.      On 22 March 1996 Mr Channell was involved in an accident while working for Key Transport. Mr Channell made a claim for workers’ compensation against Key Transport in relation to the injuries he had suffered in this accident.

7.      As a result of his claim for compensation, Mr Channell received periodic payments of compensation up to and including 4 October 1999.

8.      On 19 October 1999 Mr Channell claimed DSP. On 26 October 1999 Mr Channell lodged with Centrelink a completed claim form for DSP.

9.      In support of his claim for DSP, Mr Channell lodged a Mod C (Compensation and Damages) form on 26 October 1999. On this form, Mr Channell advised that he was pursuing a workers’ compensation claim against Key Transport.  Mr Channell also advised that he had, until 4 October 1999, been in receipt of periodic payments of compensation of $593.00 per week.

10.     While his claim for DSP was being assessed, Mr Channell claimed and was granted Newstart Allowance (NSA). On 26 October 1999 Centrelink gave Mr Channell written notice of the decision to grant his claim for NSA, effective from 19 October 1999. This notice included the following information:

YOU MUST TELL US IF ANY OF THESE THINGS HAPPEN OR IS LIKELY TO HAPPEN

. . . you or your partner claim or receive compensation (regular payments or lump sum) . . . .

11.     On 1 November 1999 Centrelink gave Mr Channell written notice that any compensation he received may affect his entitlement to Centrelink payments. This notice stated, in part:

If you receive a any payment of weekly compensation or a lump sum compensation payment, some or all of the social security payment paid to you since the date of injury may have to be paid back to us.

Any compensation you receive may also stop you from receiving social security payments in the future.

Before you agree to settle your compensation claim, you or your solicitor should contact us to find out if you will have to pay back any money and if  your future payments will be affected.

You must tell us within fourteen (14) days of receiving a compensation payment, or if you are already receiving periodic payments ( e.g. weekly payments) of compensation, if the amount of compensation you receive changes.

If you have any questions about this letter, or you want to talk to us about a compensation payment please phone this office of [phone].

Please keep this letter in case you need to read it again, as it contains important information.

12.     On 16 December 1999 Centrelink decided to grant Mr Channell DSP from 19 October 1999, and he was paid arrears of DSP, being the difference between the NSA paid to him and the DSP he was entitled to receive, from 19 October 1999 [T30:pp168-171]. Effectively, therefore, Mr Channell was paid DSP only from 19 October 1999, and was not paid NSA.

13.     On 13 January 2000 Centrelink gave Mr Channell written notice of his ongoing payments of DSP, and of his rights and obligations in relation to DSP [T10:pp77-78]. This notice also included the following information:

WHAT YOU MUST TELL US

Under sections 132 and 133 of the Social Security Act 1991 you must tell us within 14 days (28 days if residing outside Australia) if any of these things happen, or may happen. You can tell us by writing to us, by phoning or you can come in and talk to us at any of our offices.

. . . if you or your partner claim or receive compensation;

. . . if you or your partner receive a lump sum amount of money or one-off payment from any source.

14.     On 28 June 2004 Centrelink received from lawyers acting for Mr Channell, a request for an estimate of the effect of a lump sum compensation payment on Mr Channell’s entitlement to Centrelink payments.

15.     On the same date Centrelink gave the lawyers written notice that any compensation received by Mr Channell may affect his entitlement to Centrelink payments. In part, this notice stated that:

We understand that you act for [Mr Channell] in a claim for compensation/damages.

Under Part 3.14 of the Social Security Act 1991 some or all of Centrelink payments with the exception of Family Payments, Carer Allowance and Mobility Allowance made to your client and partner may be recovered by us from your client's compensation payment. In addition, a compensation payment may affect any current or future social security entitlement.

To enable us to review the progress of Mr Alistair George Channell 's compensation claim, would you please notify this office if your client's claim is withdrawn, you cease to act in the matter, your client receives a payment by way of compensation or your client's claim settles.

16.     Also on the same date Centrelink gave the lawyers, in accordance with their request of that date, written notice of an estimate of the amount to be repaid and preclusion period if Mr Channell were to receive lump sum compensation of $125,000.00. This notice was faxed to the lawyers on 28 June 2004 and included the following information:

Social security law provides that when a person receives a lump sum payment of compensation, part of the payment is considered to be for lost earnings or lost capacity to earn (compensation part). All estimates given by us use 50 per cent of the lump sum as the compensation part. The compensation part is then used to calculate a period of time when a person will not be eligible to receive Centrelink payments, with the exception of Family Payments, Carer Allowance and Mobility Allowance. This period of time is called the "preclusion period" and, depending on a person's circumstances, may affect past and/or future payments made to that person.

The settlement amount in this letter may vary from the figure you nominated. Any earlier lump sum settlement for the same event may have been added and past periodic compensation may have been deducted where it is required to be repaid from the settlement. Based on an estimated settlement amount of $125,000.00 and the compensation part amount of $62,500.00, the repayment amount is likely to be $9,848.21 and the preclusion period is likely to be 5 October 1999 to 6 August 2001. If your client is currently in receipt of Centrelink  payments, or begins to receive Centrelink  payments prior to the final settlement date, then these payments may also be recoverable if the preclusion period extends into the future.

From information supplied by you, we have calculated this estimate on the basis that the settlement was made on the date of this letter. It assumes that your client's claim will settle by agreement, that it contains some compensation for lost earnings or lost capacity to earn and that the lump sum will not be solely for arrears of periodic compensation. You should note that if there is no provision for lost earnings or lost capacity to earn, then the compensation provisions do not apply to the settlement.

17.     On 5 November 2004 Centrelink gave CGU Insurance written notice, which was by way of annual review, of a request for information regarding the status of Mr Channell’s claim for compensation.

18.     On 19 November 2004 Centrelink received verbal advice from a representative of CGU Insurance that Mr Channell’s claim for compensation had settled without the involvement of CGU Insurance.

19.     On 13 July 2005 Centrelink received written advice from the solicitors for Keystart Transport, that Mr Channell’s workers’ compensation claim had settled on 19 July 2004. A Deed of Settlement and Release, drawn up to formalise the agreement between Key Transport and Mr Channell to settle Mr Channell’s claim, was included in the information provided by the solicitors.

20.     The Recitals to the Deed specified that, because of the injuries suffered by him in his workplace accident of 22 March 1996, ‘[Mr] Channell has sustained physical and economic loss and damage (Loss)’, and that he had commenced proceedings against Key Transport and sought ‘damages with respect to the Loss’.

21.     The Deed of Settlement and Release formalised the terms of the settlement agreed between Key Transport and Mr Channell, which included payment to Mr Channell by Key Transport of the sum of $155,000.00. Centrelink received further verbal confirmation from Key Transport’s solicitors on 20 July 2005 that a global allowance for economic loss was made for in this settlement amount.

22.     On 20 July 2005 Centrelink gave Mr Channell written notice of the decision that his lump sum compensation payment of $155,000.00 meant that he had a lump sum preclusion period from 5 October 1999 to 14 January 2002, and that he had to repay to Centrelink the amount of $12,134.33.

23.     On 26 August 2005 Mr Channell requested a review of that decision.

24.     On 14 October 2005 a Centrelink Original Decision Maker (‘ODM’) review concluded that Mr Channell’s lump sum compensation payment resulted in a lump sum preclusion period from 5 October 1999 to 14 January 2002, that there were no special circumstances that allowed any part of this payment to be disregarded, and that the amount of $12,134.33 had to be recovered.

25.     On 25 November 2005 a Centrelink ARO reviewed and affirmed the decision to recover the amount of $12,134.33 because of Mr Channell’s lump sum preclusion period.

26.     The SSAT reviewed and affirmed the decision on 10 July 2007. The SSAT found that the payment of $155,000.00 made to Mr Channell was a lump sum compensation payment and that, because of this payment, Mr Channell had a lump sum preclusion period from 5 October 1999 to 14 January 2002. The lump sum preclusion period resulted in a recoverable amount of $12,134.33. The SSAT concluded that there were no special circumstances that would allow all or a part of Mr Channell’s lump sum to be disregarded, and that the entire amount of $12,134.33 was a debt that must be recovered.

RELEVANT LEGISLATION AND CASE LAW

27.     The legislation relevant to this matter is contained in the Social Security Act 1991 (‘the Act’).

28. Section 17 of the Act sets out compensation recovery definitions.

29. Subsection 17(2) of the Act defines compensation for the purposes of social security law. It provides a very broad definition of compensation. Under this definition, compensation is effectively any payment of compensation or damages paid as a result of a personal injury, whether or not the compensation payer makes an admission of liability, and where that payment includes an amount paid in respect of lost earnings or lost capacity to earn.

30.     In Baker and Secretary, Department of Social Security (1990) AATA 5690 the Administrative Appeals Tribunal considered whether a lump sum payment, received by Mr Baker after he withdrew proceedings he had commenced to recover workers’ compensation, was a payment of compensation. At paragraph 24, Deputy President McMahon commented that:

. . . it is valid, in my opinion, to have regard to the quest by the worker when identifying the nature of the moneys that he subsequently received. He had been paid weekly sums of compensation before he made his application to the Court. His application for compensation was clearly expressed and indicated that it was compensation in respect of an incapacity for work which he sought.

31.     Deputy President McMahon went on to find, at paragraph 26, that:

It was a payment that was made in the course of compensation legal proceedings and the payment was made as a result of those proceedings having been brought. It is true that it was not a payment made pursuant to a court order. Nevertheless having regard to the totality of the evidence, I am of the view that it can not be regarded as anything other than a payment by way of compensation . . . .

32.     Mr Channell claimed compensation following personal injuries he suffered while working on 22 March 1996. As a result of this claim, Mr Channell received periodic payments of workers’ compensation up to and including 4 October 1999. These payments ceased because Mr Channell had received the prescribed limit for periodic compensation under Western Australian workers’ compensation law. After these periodic payments of workers’ compensation stopped, Mr Channell commenced proceedings seeking compensation under common law.

33.     The Deed of Settlement and Release executed to settle Mr Channell’s common law claim for compensation makes it clear that the lump sum payment of $155,000.00 received by Mr Channell was by way of compensation for the losses he had suffered due to the personal injuries he sustained in his workplace accident on 22 March 1996. These losses included, as set out at paragraph D of the Recitals to the Deed, ‘physical and economic loss and damage’.

34. In the Tribunal’s opinion it follows that the lump sum payment of $155,000.00 received by Mr Channell was a lump sum compensation payment, as defined by subsection 17(2) of the Act. The Tribunal rejects Mr Channell’s assertion to the contrary.

35.     Subsection 17(3)(a) provides that the compensation part of a lump sum compensation payment made in settlement of a claim for compensation is 50% of the lump sum compensation payment.

36.     The Deed of Settlement and Release between Mr Channell and Key Transport specifies that the lump sum payment of $155,000.00 was by way of settlement of Mr Channell’s common law claim for compensation and was dependent on his discontinuing his common law proceedings.

37.     Accordingly, the compensation part of Mr Channell’s lump sum payment of compensation is $77,500.00.

38.     Subsection 17(1)(a) provides that Disability Support Pension is a compensation affected payment.

39. Part 3.14 of the Act details the effect of compensation on a CAP and subsection 1161(1)(b) specifies that DSP - where the DSP was claimed on or after 1 May 1987, and the compensation was received on or after 1 May 1987 - is affected by the provisions of Part 3.14.

40. In the Tribunal’s view it is clear that as Mr Channell claimed DSP on 19 October 1999 and received compensation on 19 July 2004, his lump sum compensation payment affects the DSP he received according to the provisions of Part 3.14 of the Act.

41. Section 1170 of the Act provides for the calculation of a lump sum preclusion period for a person who receives a lump sum compensation payment and subsection 1170(4) specifies that the number of weeks in lump sum preclusion period is calculated by dividing the compensation part of the lump sum by the income cut-out amount.

42. Subsection 17(8) of the Act sets out the formula used to arrive at the income cut-out amount and subsection 17(1) specifies that the components used in this formula, and therefore the cut-out amount itself, are those components in force at the time a lump sum compensation payment is received.

43.     The income cut-out amount as at 19 July 2004 was $648.50.

44.     Mr Channell’s lump sum preclusion period is calculated by dividing 77,500.00 (the compensation part of his lump sum payment of compensation) by 648.50, resulting in a figure of 119.50 weeks.

45. Subsection 1170(5) of the Act provides that, if the result of a calculation made under subsection 1170(4) is not a whole number, that number is to be rounded down to the nearest whole number. Mr Channell’s lump sum preclusion period therefore is 119 weeks.

46. Under subsection 1170(1)(a) of the Act, a lump sum preclusion period begins on the day after the day to which periodic payments of compensation were paid. As Mr Channell was paid periodic payment of workers’ compensation to 4 October 1999, his lump sum preclusion period begins on 5 October 1999.

47. Subsection 1170(1)(b) of the Act specifies that a lump sum preclusion period ends at the end of the number of weeks calculated according to subsections 1170(1)(4) and 1170(1)(5). Starting from 5 October 1999, the period of 119 weeks ends on 14 January 2002.

48.     Accordingly, Mr Channell’s lump sum preclusion period is 5 October 1999 to 14 January 2002.

49. Subsection 1169(1) of the Act provides that a CAP is not payable during a lump sum preclusion period.

50.     This means that DSP was not payable to Mr Channell in respect of the period 5 October 1999 to 14 January 2002, inclusive.

51. Section 1179 of the Act provides that the recoverable amount in relation to a lump sum preclusion period is the smaller of the compensation part of the lump sum compensation payment and the total of the CAP paid during the lump sum preclusion period.

52.     Mr Channell was paid DSP from 19 October 1999. The total amount of DSP he was paid from 19 October 1999 to 14 January 2002 was $12,134.33. As the compensation part of his lump sum payment was $77,500.00, the recoverable amount in relation to his lump sum compensation payment is $12,134.33.

53. Section 1178 of the Act provides that a person is to be given written notice of the recoverable amount calculated with reference to section 1179.

54. On 20 July 2005 Mr Channell was given written notice under section 1178 that the recoverable amount in relation to his lump sum compensation payment was $12,134.33.

55. Under section 1184F of the Act, the recoverable amount specified in a notice given under section 1178 is a debt due to the Commonwealth.

56.     Accordingly, the amount of $12,134.33 is a debt due to the Commonwealth by Mr Channell.

57. Subsection 1184K(1) of the Act allows for the whole or a part of a compensation payment to be disregarded if there are special circumstances that make it appropriate to do so.

58.     The meaning of ‘special circumstances’, whether in relation to the compensation provisions or other provisions of social security law, has been the subject of much judicial examination, and it is accepted that it should be interpreted in the same way no matter under which provision of social security law it is applied (see, for example, Secretary, Department of Social Security and Duzevic (1996) AATA 10752, at paragraph 32).

59.     In Beadle and Director-General of Social Security (1984) AATA 1548, an application regarding an allowance for disabled children, the Tribunal, at paragraph 12, stated that:

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.

60.     More recently the Full Federal Court, in reviewing the cases in relation to the recovery of a Family Tax Benefit debt in Dranichnikov and Centrelink (2003) FCAFC 03/133, stated that:

what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary . . . . [at paragraph 66]

61.     Mr Channell has not shown that there any specific circumstances that would take his case out of the ordinary.

62.     Mr Channell, as a result of injuries he suffered in a workplace accident, claimed and received workers’ compensation, first as periodic payments to replace the wages he had lost, and then as a lump sum payment to settle his claim. The Tribunal is of the view that the lump sum payment of $155,000.00 Mr Channell received was paid as compensation for the losses he had suffered as the result of his accident, including economic losses.

63.     On 1 November 1999 Mr Channell was first given written advice by Centrelink of the possible effects of the receipt of compensation. This letter included advice that a lump sum compensation payment could mean he would have to repay some or all of any Centrelink payments he received. A letter in similar terms was also sent to Mr Channell on 31 October 2002.

64.     In addition, letters in similar terms were given to Mr Channell’s original solicitors on 31 October 2002, and to his new solicitors on 28 June 2004.  An estimate of recovery and preclusion period was also given to those solicitors on 28 June 2004, prior to Mr Channell settling his claim for compensation. This advice estimated that, based on lump sum payment of $125,000.00, Mr Channell’s preclusion period would be 5 October 1999 to 6 August 2001, and he would have to repay to Centrelink $9,848.21. It is clear that, prior to agreeing to settle his claim, Mr Channell had been given both general and more specific advice about the way that a lump sum compensation payment would affect his entitlement to Centrelink payments.

65.     The letters of 1 November 1999 and 31 October 2002 informed Mr Channell that he was required to advise Centrelink of the receipt of a lump sum compensation payment within 7 days of receiving it. The more general advices Mr Channell was given regarding his DSP on 13 January 2000 and subsequently also informed him that he was required to advise Centrelink of the receipt of compensation or of any lump sum payment. Mr Channell did not advise Centrelink that he had settled his claim for compensation and had received a lump sum compensation payment.

66.     The Tribunal finds that there are no special circumstances in this case. Accordingly, no part of the lump sum compensation payment of $155,000.00 received by Mr Channell can be taken not to have been made. 

67.     Accordingly the relevant lump sum preclusion period is 5 October 1999 to 14 January 2002, and the amount of $12,134.33, being the total of the DSP paid to Mr Channell from 19 October 1999 to 14 January 2002, is a debt due to the Commonwealth that must be recovered.

DECISION

68.     The Tribunal affirms the decision under review.

I certify that the 68 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member

Signed: ......................[Sgd Ms C Skinner]......................
  Associate

Date/s of Hearing  24 April 2008
Date of Decision  28 May 2008
Applicant’s Representative      Self-represented

Respondent’s Representative  Mr Richard Wright
  Centrelink Legal Services Branch