DE ARAUGO And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
[2009] AATA 986
•23 December 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 986
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/0895
GENERAL ADMINISTRATIVE DIVISION ) Re BENJAMIN MICHAEL DE ARAUGO Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Deputy President D G Jarvis Date23 December 2009
PlaceAdelaide
Decision The Tribunal sets aside the decision under review, and in place of that decision decides that:
(a) in the special circumstances of the case, the sum of $439,940.00 being portion of the compensation part of the lump sum compensation payment made to the applicant, be treated as not having been paid; and
(b) remits the matter to the respondent for reconsideration in order to calculate the preclusion period in accordance with these reasons.
..............................................
Deputy President
CATCHWORDS
SOCIAL SECURITY – compensation receipt – calculation of preclusion period – applicant suffered brain and spinal cord injuries and has extreme residual disabilities – substantial compensation recovered – significant disparity between economic loss recovered and statutory formula – substantial costs of future care – claim reduced by 50% for contributory negligence – further significant reduction in quantum of claim – multiple circumstances not “special” in themselves but in combination amount to special circumstances – preclusion period reduced to accord with counsel’s opinion as to economic loss – decision under review set aside.
Social Security Act 1991 (Cth), s 1184K(1)
Beadle v Director-General of Social Security (1985) 7 ALD 670
Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Evers v Bennett (1982) 31 SASR 228
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Haidar v Secretary, Department of Social Security (1998) 52 ALD 255
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Horsnell [2009] AATA 519
Riddell v Secretary, Department of Social Security (1993) 42 FCR 443
Secretary, Department of Education and Workplace Relations and Donald (2006) 92 ALD 791
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
REASONS FOR DECISION
23 December 2009 Deputy President D G Jarvis 1. The applicant, Benjamin Michael De Araugo, received grievous injuries in an accident on 12 April 2000. He was a pedestrian and was struck by two motor vehicles.
2. He instituted proceedings in the District Court of South Australia. He agreed that his claim should be reduced by 50% by reason of his contributory negligence, and after allowing for the agreed reduction of 50%, his claim was ultimately settled for $1,429,781.10 plus costs.
3. In accordance with the formula contained in s 1170(3) of the Social Security Act 1991 (Cth) (the Act), whereby one half of the settlement sum is taken to be compensation for loss of earnings, an officer of Centrelink arrived at a lump sum preclusion period of 958 weeks, which will expire on 21 August 2018.
4. Mr De Araugo applied for review of the officer’s decision, and the decision was later affirmed by an authorised review officer and later by the Social Security Appeals Tribunal (SSAT). Mr De Araugo has appealed to this tribunal for review of the SSAT’s decision.
Issues before the Tribunal
5. The issues before the tribunal are:
(a)whether special circumstances exist which make it appropriate to treat the whole or part of the payment as not having been made; and
(b)if so, how much of the settlement sum should be treated as not having been paid.
Background
6. The following summary is based largely on the facts asserted in the applicant’s Statement of Facts, Issues and Contentions, which are supported by various documents included in the s 37 documents. The facts so asserted were not contested by the Secretary.
7. Mr De Araugo was 22 years of age at the time of the accident, and is now aged 32.
8. He suffered very severe injuries in the accident, including paraplegia and severe brain damage trauma leading to various functioning and cognitive deficits. He has been left with grave permanent disabilities. As a result of a complete necrosis of his spinal cord there is no stimulation at all to the muscles in his back, limbs or buttocks. This has resulted in the severe wasting of muscles and a lack of cushioning over his bony prominences, especially his buttocks. As a result he has developed serious pressure sores. He has had surgery to provide more skin over his buttocks, but may in the future have to undergo one above knee amputation to allow for skin to be preserved for any future operations that may be required.
9. As a result of his injuries, Mr De Araugo has had to lie face down on his bed at least since November 2006 because of the wasting of the muscles in his buttocks. There is a grave danger that if he were to be placed on his back his skin will break, thereby causing further complications. He may have to spend the rest of his life lying on his front.
10. Because of the necessity for him to lie on his front and resulting lack of mobility, his pelvic joint is fused and he is unable to bend his body at his pelvis, and his left femur has come out of the socket in his pelvic joint. It is almost certain that surgery will be required in the future to try to remedy his pelvic joint.
11. The injury to his brain has impaired his ability to cope with and maintain skin care so as to avoid further problems with pressure sores. He falls from wheelchairs. He will never work again due to his paraplegia and brain injuries. He was not, however, under a legal incapacity, and the settlement of his claim was not approved by the Court.
Settlement of Applicant’s Claim for Damages
12. After liability was agreed on the 50/50 basis, the applicant’s solicitors requested an opinion from counsel as to the quantification of the applicant’s claim. The resulting opinion is exhibit A1. Counsel advised that the quantum of the claim should include the following items relevant to the economic loss:
Past economic loss, including past superannuation $130,000.00
Future economic loss $348,800.00
Superannuation $43,092.00
Interest on past economic loss, adjusted as appears below $28,009.00
$549,901.00Reduced by 50% $274,950.50
The interest component of counsel’s advice came to $45,000.00, but included interest on the sum of past economic loss, namely $130,000.00, and on the claim for voluntary services, namely $78,860.00. Interest adjusted pro-rata so that it relates only to past economic loss comes to the above amount of $28,009.00.
13. Counsel’s assessment of economic loss (as reduced for contributory negligence), namely $274,950.50, compares with the figure of $714,890.55 used to calculate the preclusion period in accordance with the statutory formula provided for in s 1170(3) of the Act.
14. After receiving counsel’s advice, Mr De Araugo’s solicitors sent a letter dated 13 August 2007 (exhibit R1, T7, pages 79 – 84) to the solicitors for the insurer involved. The letter formulated his claim, and substantially repeated the formulation advised by counsel. It included the figures relevant to his claim for economic loss set out in paragraph 12 above except that interest was calculated on both past economic loss and voluntary services. The claim as so formulated, including an amount of $3,432,000.00 for future care, came to $4,553,894.75. This figure was then reduced by 50% in accordance with the agreement as to liability, and the resulting figure was $2,276,947.38.
15. The solicitor who acted for the plaintiff, Mr P S Sekhon, gave evidence that after he submitted the formulated claim, there were two settlement conferences with the legal representatives of the insurer. In a letter dated 11 January 2008 to Centrelink, which I assume preceded the second conference, Mr Sekhon said that his firm was in the process of negotiating a settlement, and “(expected) that the gross lump sum payment (would) be in the vicinity of $1,650,000.00” (exhibit R1, T7, page 86). The letter went on to ask for information as to whether Centrelink would require any amounts to be repaid out of the settlement sum, and also whether there would be a preclusion period in respect of future benefits.
16. Following the second conference, the parties agreed to settle the matter for a total amount of $2,858,296.20 less 50% for contributory negligence. Mr Sekhon said that the parties did not, however, agree on the quantification of any of the items included in the claim as formulated in the letter of 13 August 2007. Rather, counsel for the insurer declined to enter into negotiations in relation to each item of the formulated claim, and the negotiations proceeded on the basis of arriving at an overall settlement figure for the total of all items.
17. Mr Sekhon gave evidence to the effect that the advice he had received from counsel left some leeway for negotiations, that Mr De Araugo was by then pretty upset that the matter had been dragging on prior to Mr Sekhon’s firm becoming involved, that Mr De Araugo had said that he was considering suicide, that he was tired of the ongoing delays in resolving his claim and that he wanted to put an end to the matter, and that it was in those circumstances that Mr De Araugo agreed to settle his claim for the above sum of $1,429,781.10 plus costs.
18. The advocate for the Secretary, Ms Giaretto, tendered a settlement report letter dated 31 January 2008 from the insurer’s solicitors to their client reporting on the settlement of the claim by Mr De Araugo (exhibit R2). They set out in their settlement report what they regarded to be a “reasonable breakdown” of the settlement amount.
19. The components of the formulated claim submitted by Mr De Araugo’s solicitors and the “reasonable breakdown” referred to by the insurer’s solicitors in their settlement report are as follows.
Item
Amount Claimed by Applicant
“Reasonable breakdown” by Insurer’s Solicitors
Non-Economic Loss (53 points) $83,740.00 $83,740.00.00 Past Economic Loss $130,000.00 $117,000.00 Past Superannuation (included above) $13,000.00 Future Economic Loss $348,800.00 $348,800.00 Future Care $3,432,000.00 $1,500,000.00 Voluntary Services $78,860.00 $78,860.00 Future loss of Companionship $20,000.00 (not included) Computer and Technology $132,402.75 $80,000.00 Repromed (IVF) $25,000.00 $25,000.00 Modification cost of housing $200,000.00 $125,000.00 Cost of Air-conditioning $15,000.00 $15,000.00 Future Superannuation $43,092.00 $38,368.00 Interest $45,000.00 (included below) Interest on Past Economic Loss (included above) $25,747.10 Interest on Past Voluntary Services (included above) $10,000.00 Future treatment (not included) $225,000.00 Transport/Holidays (not included) $50,000.00 Travel (not included) $40,000.00 Case Management (not included) $80,000.00 Medicare Australia (not included) $2,781.10 TOTAL
$4,553,894.75
$2,858,296.20
20. It can be seen from the above figures that the “reasonable breakdown” arrived at by the insurer’s solicitors included all of the components of the formulated claim made by Mr De Araugo’s solicitors in their letter of 13 August 2007, (although they were described somewhat differently in some cases). Their breakdown showed the amount of past and future economic loss at the same amount as the formulated claim, except that their figure for interest on past economic loss was $25,747.10, compared with the adjusted figure for interest of $28,009.00 referred to in paragraph 12 above. Paragraph 1.2 of the settlement report letter expressly confirms that no breakdown was agreed with Mr De Araugo’s solicitors, save that future medical costs were agreed at $225,000.000. This amount had not been included in the claim as formulated by Mr De Araugo’s solicitors in their letter of 13 August 2007.
21. The most significant difference between the formulated claim and the “reasonable breakdown” referred to in the settlement report to the insurer’s lawyers is the amount of the item for future care. This entailed a difference of nearly $2,000,000.00. In addition, the formulated claim made by Mr De Araugo’s solicitors did not include the last five items accepted by the insurer’s solicitors as part of their “reasonable breakdown”.
22. The outcome of the settlement negotiations was accordingly that Mr De Araugo’s formulated claim of $2,276,947.38 was reduced to the above settlement figure of $1,429,148.10, a reduction of about 37%.
Legislative Scheme
23. Part 3.14 of the Act provides for the effect of compensation recovery on certain social security benefits. Section 1160(1) of the Act provides for the general effect of that Part of the Act. It provides as follows.
“1160(1)This Part operates in certain specified circumstances to do one or more of the following:
(a) reduce a person’s compensation affected payment;
(b) render a person’s compensation affected payment not payable;
(c)require the repayment of some or all of a person’s compensation affected payment;
because of the receipt of compensation by the person or the person’s partner.”
24. Section 1169(1) of the Act provides in effect that a compensation affected payment is not payable during a lump sum preclusion period. It provides as follows.
“1169(1) If:
(a)a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.”
25. Section 17(2) of the Act defines “compensation”. This includes a payment of damages “that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”.
26. Section 17(1) of the Act defines the expression “compensation affected payment”, and a disability support pension, being the benefit which Mr De Araugo is likely to apply for at the end of the preclusion period, is included in that definition.
27. Subsection 1170(3) provides relevantly that the lump sum preclusion period is the period that begins on the day on which the loss of earnings or loss of earning capacity began, and ends at the end of the number of weeks worked out pursuant to the statutory formula referred to in subsections 1170(4) and (5). That formula refers to the “compensation part of lump sum”.
28. Section 17(3) of the Act provides an artificial statutory formula for determining the “compensation part of a lump sum compensation payment”. It provides relevantly as follows.
“17(3)Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a) 50% of the payment if the following circumstances apply:
(i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or … .”
29. The above provisions must, however, be read subject to section 1184K of the Act. That section authorises the Secretary (and this tribunal, standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment in certain circumstances. Subsection 1184K(1) provides as follows.
“1184K(1)For the purposes of this Part, the Secretary may treat the whole or part of the 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.”
Parties’ contentions
30. Counsel for Mr De Araugo, Mr Cole, contended that there were special circumstances in this matter, and that I should treat part of the compensation payment as not having been made in exercise of the discretion conferred by s 1184K(1) of the Act.
31. The advocate for the Secretary, Ms Giaretto, submitted to the contrary. She referred to dictum of Hill J in Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 at 263 and to other authorities to the effect that the primary responsibility for paying compensation for persons injured should be borne by those responsible for the injury, rather than by the public purse. She also pointed out that it was not uncommon that the 50% formula used to determine the preclusion period may be more, and sometimes substantially more, than the amount recovered for loss of earnings.
32. Ms Giaretto also referred to the potential inequity among persons who had recovered compensation that would result if special circumstances were found to exist where a recipient of compensation possessed significant financial resources, and submitted that Mr De Araugo was in a better position than most compensation recipients. In addition, she referred to the likely interest income to be derived on the settlement funds, and the extent to which that would offset continuing expenses, which had been estimated at $9,000.00 to $10,000.00 per month.
Consideration
Are the applicant’s circumstances special?
33. I first consider whether special circumstances exist that would make it appropriate for me to treat the whole or part of the payment as not having been made.
34. The concept of what constitutes “special circumstances” has been discussed in many cases in the Federal Court and in this tribunal. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the tribunal was dealing with an application under a different section of the Act which also, however, involved a consideration of whether special circumstances existed. Toohey J said (at page 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.”
35. In the same case on appeal ((1985) 7 ALD 670), a Full Federal Court (Bowen CJ, Fisher and Lockhart JJ) said, at 675, that it was “in broad agreement with the approach of the Tribunal”, and reiterated the need to avoid limiting the scope of what might constitute special circumstances when it explained, at 674:
“We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.”
36. In a later case, Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court’s decision in Beadle, observed at 545 that special circumstances:
“… would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary 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.”
37. The flexibility of the concept of special circumstances was referred to in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443, where a Full Court of the Federal Court (Neaves, Burchett and O’Loughlin JJ) said, at page 450:
“Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.”
38. In a similar vein Heerey J, in Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147, said at [17]:
“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances … ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances.” (References omitted).
39. The purpose of the “special circumstances” provision was explained (in the context of a similar section, namely s 1237AAD of the Act, ) by French J (as he then was) in Secretary, Department of Social Security v Hales (1998) 82 FCR 154, when he said, at page 162:
“The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt.”
His Honour also said, at page 162:
“The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it.”
40. Finally, I refer to Haidar (supra), where Hill J discussed the predecessor of section 1184K of the Act, and agreed with an earlier observation by von Doussa J to the effect that in that section an attempt was made to balance on the one hand finite budgetary allocations against the interests of the recipient of the payment. His Honour continued (52 ALD 255 at 263):
“Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments.
However, the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184, therefore, provided the means whereby the secretary or, in the event ultimately of an appeal to the Administrative Appeals Tribunal, that tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances. The question of what constitutes special circumstances has been the subject of a number of decisions of this court. It suffices here to say no more than that something is required which would take the matter out of the usual ordinary case …”.
41. In the present matter there are a number of factors that suggest that there are special circumstances within the meaning of s 1184K(1) of the Act. These include the following matters.
(a)Mr De Araugo has been left with extremely severe permanent disabilities. Ms Catherine Parsonage was called in support of his case. She is a legal practitioner of 28 years’ experience, and for nearly all of that time has had an extensive practice involving accident, workers’ compensation and medical negligence cases. She described the level of disability from which Mr De Araugo is suffering as “catastrophic”, and said that his case stands out from the rest of the cases she has encountered “by a long way”. I do not think that the statistical evidence in exhibits R3 and R4 in relation to the frequency and severity of pedestrian accidents and cases involving serious injury negates the significance of Ms Parsonage’s evidence.
(b)There is evidence before me from which I can be satisfied as to the proper assessment of Mr De Araugo’s past and future loss of earning capacity. This consists of an opinion from an experienced barrister advising as to the quantum of that component of the claim, and the settlement report of the solicitors for the insurers, which acknowledges the reasonableness of the claim for loss of past and future earnings. There can be no suggestion that the applicant is putting forward an unreliable or self-serving estimate of his actual loss of past or future earnings. I am satisfied that calculating the preclusion period by reference to the amount of the formulated claim for loss of earning capacity will not involve any “double dipping”, and would be consistent with the policy of the Act insofar as it provides for preclusion periods.
(c)There is a very significant disparity between the amount of this component of Mr De Araugo’s formulated claim, namely $274,950.50 (including superannuation and interest) and the amount resulting from the statutory formula, namely $714,890.55. The latter figure is more than two and a half times the amount claimed for economic loss.
(d)The total amount recovered by Mr De Araugo includes an unusually high component for future care and treatment (which is of course a reflection of the severity of his permanent disabilities), and this in itself has produced a significant disparity between the amount recovered for economic loss and the amount resulting from the statutory formula.
(e)Further, as a result of the settlement of the issue of liability, the amount recovered by Mr De Araugo for economic loss (as well as the other components of his claim) has been reduced by 50%, by reason of his contributory negligence. This has further increased the disparity between the amount recovered for economic loss and the amount resulting from the statutory formula.
(f)Mr De Araugo ultimately settled his claim for a figure that was some 37% less than the amount of his formulated claim. The settlement was some 42% less than the amount of the formulated claim, if that claim had included some additional components that were referred to in the settlement report letter; these additional components would have increased his formulated claim by almost $200,000.00, allowing for the 50% reduction for contributory negligence. Whilst Mr De Araugo’s solicitor, Mr Sekhon, referred to counsel’s advice as containing “some leeway for negotiation”, he also referred to the circumstances that were affecting Mr De Araugo at the time of the negotiations, to which I referred in paragraph 17 above. It appears from Mr Sekhon’s evidence that Mr De Araugo was anxious to settle his claim, and the resulting settlement amount entailed a very significant reduction from the advice provided by his counsel. There is therefore evidence that the settlement entailed two significant reductions, first because of the agreement as to liability, and second because of the figure agreed for quantum.
(g)Mr De Araugo will be very reliant upon paid carer assistance. From the medical reports before me it appears likely that he will not be able to maintain a long-term relationship with a partner, and so will receive very little assistance on a voluntary basis from any partner.
(h)The denominator used in the formula for calculating the preclusion period is based upon the income cut off amount at the time of calculation. This is disadvantageous to compensation recipients who receive very large amounts of compensation, because the formula produces a lengthy preclusion period, during which it could be expected that the income cut of amount will increase over time with adjustments for inflation and cost of living increases.
42. Mr Cole also relied on a further factor. He cited certain authorities which suggest that the reduction of 50% for contributory negligence was greater than usual for pedestrian cases. These authorities included Evers v Bennett (1982) 31 SASR 228, where a Full Court of the Supreme Court of South Australia varied an apportionment of liability from 50%-50% to 70%-30% in favour of the pedestrian. The Court referred to the difference in the standards of care expected by the law of motorists and pedestrians, resulting in cases where a greater proportion of liability was visited upon the motorist, who was capable of doing considerable injury to a pedestrian, in circumstances where there were marked departures from the proper standard of care on the part of both the motorist and the pedestrian. However, I do not think that the 50/50 apportionment in this case constitutes a special circumstance. I was not provided with any information that suggested that that apportionment was inappropriate in the circumstances of this case, and from other cases that come before this tribunal it is not unusual for the compensation recovered to be reduced by proportions of the order of 50%, either because of contributory negligence or the risks of litigation.
43. There was also some reference to Centrelink having provided incorrect advice in a letter dated 14 January 2008 to the effect that the preclusion period would end on 16 November 2010. However, the letter from Mr De Araugo’s solicitors that gave rise to that estimate was potentially ambiguous, and in any event, it was acknowledged that Mr De Araugo did not rely upon the advice contained in Centrelink’s letter. I therefore consider that this matter does not constitute a basis for establishing special circumstance.
44. As mentioned above, Ms Giaretto contended that the factor referred to in paragraph 41(e) above, is not an unusual circumstance. In support of this aspect of her argument, Ms Welfare referred in particular to a passage from the judgment of Lindgren J in Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076 at [75], which suggested that even a gross disparity between the statutory formula and the amount actually recovered for loss of earnings cannot be a special circumstance at all.
45. However, his Honour expressly said in the passage in question that he agreed with the approach of Kiefel J in Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348 at [33]. In that paragraph her Honour made it clear that the relevant disparity could not “by itself” amount to special circumstances, or a matter out of the ordinary (116 FCR 348 at [33]), and I do not think that Lindgren J intended by the relevant passage to convert her Honour’s qualified proposition to an absolute proposition, as submitted by Ms Giaretto.
46. I also reject the contention made on behalf of the Secretary that special circumstances are negated because Mr De Araugo has financial resources that will provide support beyond the expiration of the preclusion period. In my view, it is necessary to consider Mr De Araugo’s long-term ongoing needs. It may be, as was also contended, that at the end of the preclusion period, Mr De Araugo will possess investments in excess of the asset limit for entitlement to DSP. However, that will depend on the then current limits, and as Mr Cole pointed out, Mr De Araugo may legitimately be able, over the longer term, to re-arrange his affairs so that he will not be precluded by the assets tests from receiving DSP.
47. As I pointed out in Re Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Horsnell [2009] AATA 519 at [48], it is necessary when considering the application of s 1184K(1) to have regard to all relevant circumstances in each case in combination, and it is not appropriate to disregard particular aspects of the situation of a person who has received a compensation payment simply because those aspects cannot by themselves constitute special circumstances.
48. In the present matter, it may well be that the various factors to which I have referred in paragraph 41 above would not in themselves be sufficient to constitute special circumstances, and that some of the matters entail elements of duplication. However, notwithstanding these matters, I am satisfied that the above factors in combination are such that special circumstances do exist in this case.
Extent of reduction of preclusion period
49. I now turn to the second issue, that is how much of the compensation payment should be treated as not having been made.
50. As mentioned above, there is good evidence before me that the amount of Mr De Araugo’s past and future economic loss was appropriately assessed (as reduced by 50% for contributory negligence) at the amount of this component in his formulated claim, namely $274,950.50. On the face of it, it would seem reasonable to treat the difference between this amount and the amount used by Centrelink in applying the statutory formula as not having been paid. However, Mr Cole referred to the significant difference between the total amount of the formulated claim and the amount of the settlement ultimately arrived at, and to the fact that that disparity is even greater if regard is had to the further components that had not been included in the formulated claim, including in particular the future medical costs of $225,000.00. Mr Cole therefore submitted that I should proceed on the basis that the amount actually recovered by Mr De Araugo for economic loss should be reduced to the same extent as the difference between his formulated claim, or that amount as increased by the additional components, and the actual settlement amount.
51. I do not think that it is appropriate to approach the matter in this way. As mentioned above, the significant difference between the claim as formulated by Mr De Araugo’s solicitors and the “reasonable breakdown” referred to in the settlement report to the insurer was the amount for future care. The difference between these two components was nearly $2,000,000.00.
52. Mr Sekhon said that there was no discussion at the settlement conferences regarding any adjustment to the future care component of the claim as originally formulated. I note that counsel for Mr De Araugo had anticipated that the amount claimed for this component would be disputed, and commented:
“It would be helpful in due course if we can discuss this with the other side to see where they disagree with it. If it simply comes down to a disagreement on the costings then there may some room for movement with some items” (sic) (exhibit R1, page 29).
53. There is no evidence before me to suggest that there was an overall pro-rata reduction of each of the components of the formulated claim. I appreciate that the quantification of Mr De Araugo’s claim for loss of earnings entailed some assumptions and difficulties, as submitted by Mr Cole. However, there is no evidence that the component for economic loss was reduced as a result of the negotiations that led to the settlement. If anything, the above comment by counsel, in conjunction with the settlement report by the insurer’s lawyers, suggests that the reduction in quantum should be attributable to the future care component of the formulated claim. In these circumstances, I think it reasonable to proceed on the assumption that the amount recovered for economic loss was the amount in the formulated claim which was accepted (except as to a minor difference in the interest calculation) by the solicitors for the insurers when they provided their settlement report.
54. In all of the circumstances, therefore, I think it reasonable to treat the difference between the settlement component for economic loss and the amount of the statutory formula as not having been paid.
Decision
55. The Tribunal sets aside the decision under review, and in place of that decision decides that:
(a)in the special circumstances of the case, the sum of $439,940.00 being portion of the compensation part of the lump sum compensation payment made to the applicant, be treated as not having been paid; and
(b)remits the matter to the respondent for reconsideration in order to calculate the preclusion period in accordance with these reasons.
I certify that the 55 preceding paragraphs are a true
copy of the reasons for the decision herein of
Deputy President D G JarvisSigned: .....................................................................................
B. Bills Admin AssistantDate/s of Hearing 7 September 2009
Date of receipt of
final submissions 10 September 2009
Date of Decision 23 December 2009
Counsel for the Applicant Mr S Cole
Solicitor for the Applicant Fittock & Co SolicitorsAdvocate for the Respondent Ms L Giaretto
Centrelink Legal Services Branch
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