Fairweather; Secretary, Department of Family and Community Services

[2002] AATA 886

DECISION AND REASONS FOR DECISION [2002] AATA 886

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2001/656

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Applicant
           And    PETRA FAIRWEATHER  
  Respondent

DECISION

Tribunal       Mr B J McCabe, Member  

Date4 October 2002

PlaceBrisbane

Decision      (a)      The Tribunal sets aside the decision under review, being the decision of the Social Security Appeals Tribunal dated 2 July 2001; (b)          The Tribunal finds that there are no special circumstances in this case to warrant treating all or some of the compensation monies as having not been made or received by the respondent; and (c)           The decision of the applicant, to impose a preclusion period of 31 weeks commencing on 4 April 1998 and a charge of $2,998.32, be substituted as the decision of the Tribunal in this matter.   
  ....................(Sgd)..........................
  Mr B J McCabe
  Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – compensation payment – application of statutory formula – compensation payment for personal injury received while in receipt of pension payments – statutory objectives of formula - whether special circumstances exist

Social Security Act 1991

Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67

Re Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

4 October 2002       Mr B J McCabe, Member              

Introduction

1. Petra Fairweather was injured and received a lump sum settlement of $35,000. The settlement included a small component in respect of economic loss. She was in receipt of Austudy at the time of the accident. The Secretary calculated a preclusion period commencing on 4 April 1998 for 31 weeks, and recovered a charge of $2,998.32. Ms Fairweather sought to have the decision to impose the preclusion period and the charge set aside by reasons of Ms Fairweather's special circumstances under s 1184 of the Social Security Act 1991.

2. The Social Security Appeals Tribunal ("SSAT") found there were special circumstances. It said the small amount of money actually awarded in respect of economic loss in the settlement ought to be disregarded so that the preclusion period and the charge were extinguished. The Secretary has asked the Tribunal to review the decision of the SSAT. The applicant points in particular to the effect of the Federal Court's decision in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 and the subsequent decision of the Tribunal in Re Chamberlain and Secretary, Department of Family and Community Services[2002] AATA 487.
   Material before the Tribunal

3. The Tribunal was provided with the "T" documents filed under s 37 of the Administrative Appeals Tribunal Act 1975. The decision of the SSAT was included in the "T" documents. The applicant and respondent also filed written submissions. Supplementary submissions focusing on the effect of the decisions in Chamberlain were also provided. There was no dispute on the facts, so there was no need for a hearing. The matter was considered on the papers.
   The Facts

4. Ms Fairweather injured her hand in an accident on 4 April 1998. She was studying to become a teacher at the time, and she was in receipt of an Austudy allowance. Her claim for compensation in respect of the injury was settled for $35,000 on 23 January 2001. The settlement only provided for $150 in respect of future economic loss. The respondent originally claimed a much larger amount in respect of future economic loss but the defendant had resisted on the basis that the injury would not be an impediment to the work of a teacher.

5. The applicant applied the statutory formula in s 1165 of the Social Security Act 1991 to determine the length of the preclusion period (the period during which Ms Fairweather would be ineligible to receive a range of Commonwealth benefits). The applicant also found the respondent was obliged to repay $2,998.32 pursuant to s 1166.
   The Relevant Law

6. The word "compensation" is defined in s 17(2) to be a payment that includes a component in respect of lost earnings or lost of capacity to earn. Apparently in order to facilitate administration of the Act and reduce the danger of settlements being manipulated, s 17(3) says 50% of any lump sum compensation payment is deemed to have been made in respect of economic loss. The amount the parties have agreed should be allocated amongst the different heads of damages is irrelevant. Where such a lump sum compensation payment is made, the Secretary calculates the length of the preclusion period under s 1165 and determines whether any other monies are repayable under s 1166. A repayment might be required because the injured party often continues to receive compensation-affected benefits after the date of the accident until the settlement occurs. Once the settlement is made, the preclusion period is backdated to the date of the accident and monies paid in the meantime might be recoverable out of the settlement funds.

7. The respondent says the effect of the deeming provision is unfair because only $150 was included in the compensation payment in respect of economic loss. The deeming provision meant the applicant was entitled to recover $2,998.32.

8. The deeming provision may not be rebutted: Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 at para 25 per Kiefel J. However the legislation does offer some relief in cases where the strict application of the rules produces an unfair result: there is a "special circumstances" provision at s 1184. Section 1184(1) says:

   "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."

1. The respondent told the SSAT the Secretary ought to ignore the small amount included in her settlement in respect of economic loss. She said being required to repay $2,998.32 when she only really received a much smaller amount in respect of economic loss could be regarded as special circumstances. The SSAT agreed with her.

2. Kiefel J concluded in Chamberlain that the decision-maker should not ordinarily have regard to any discrepancy between the "true" position (the amount actually awarded in respect of economic loss) and the deemed position under s 17 when deciding if special circumstances arose. Her Honour explained (at para 23):

   "It may generally be accepted that the statutory provisions here in question were intended to operate upon factual bases which were assumed and were not intended to reflect the true position. This is so with respect to the figure of fifty per cent taken of the lump sum compensation payment; the amount of basic rate of pension used to divide it; the period during which double payment is assumed to have occurred; and perhaps even the commencement of the period when the loss of earning capacity arose, which would normally be taken to be the date when the compensable injury was occasioned to the person."

1. Her Honour went on to explain that there might be circumstances where the decision-maker could have regard to the "true" position when considering whether there were special circumstances, but she said such cases were likely to be rare. Chamberlain was not regarded as an exceptional case in that sense. Her Honour said (at para 33):

   "In the present case the Tribunal considered that the application of the formulae was unfair to the applicant because she would have to pay more than she had received by way of compensation for economic loss, indeed twice as much. That factor will however be present in most cases and is an aspect of the application of the formulae. In my view it cannot, by itself, amount to a special circumstance, one out of the ordinary."

Her Honour continued (at para 34):

"The basis for the Tribunal's view was its acceptance of what the parties to the settlement said had been offered and accepted for the economic loss component. It was far less than the statute assumed to be the case in applying the formulae. Again, however, this will be so in many, if not most, cases to which the Act applies. Further, the extent of the difference from the basis upon which the parties acted could not provide the necessary "special circumstance". The statute has selected a figure which may operate in an arbitrary way."

1. The Tribunal was required to apply her Honour's reasoning in Chamberlain when the matter was remitted for further consideration. In the course of giving my reasons in that case, I said (at para 20):

   "The real lesson from Chamberlain and the other authorities seems to be this: once the Tribunal has satisfied itself the statutory formula was correctly applied, the Tribunal is not otherwise interested in the formula and whether or not it accurately reflects the 'true' position. The logic of the legislative scheme removes the need for that investigation. It is irrelevant that an applicant might have been treated more favourably if the rule were modified to reflect the amount actually allocated in respect of economic loss in a given case. The Tribunal must instead focus on whether special circumstances exist following the application of the rule and the imposition of the preclusion period (or the extraction of the sum under s 1166). If special circumstances do exist, the exercise of the discretion may be justified."

1. The same approach should be adopted in this case. There is no dispute that the formula has been correctly applied. The results might be arbitrary, but there is nothing setting this case apart from Chamberlain or similar cases: see Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545. Indeed, Mrs Chamberlain if anything had a more meritorious case in the sense she was in a more difficult financial situation and she was affected by poor health, unemployment and social isolation. None of those factors appear to be present in this case.

2. I have sympathy for the respondent. She is effectively being subjected to a tax on her settlement. But that is true of the many people who settle their claim on the basis that less than 50% of the total amount of the settlement is in respect of future economic loss. The Parliament's intention behind imposing an arbitrary rule would be frustrated if all of those individuals – including the respondent – were able to compel the Secretary to look into the terms of their settlement under s 1184.
   Conclusion

3. The SSAT decision to disregard the portion of the settlement relating to future economic loss is set aside.

   I certify that the 15 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member

   Signed:         Sarah Oliver            
     Associate

   The Matter was Heard on the Papers

   Date of Decision  4 October 2002
   Solicitor for the Applicant         Mr S Letch, Departmental Advocate
   Solicitor for the Respondent    Ms Haney, Streeting Haney Lawyers