Falavigna and Department of Family and Community Services
[2000] AATA 1112
•15 December 2000
DECISION AND REASONS FOR DECISION [2000] AATA 1112
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2000/306
GENERAL ADMINISTRATIVE DIVISION )
Re Nino Falavigna
Applicant
And Secretary, Department of Family & Community Services
Respondent
DECISION
Tribunal Mr R D Fayle, Senior Member
Date15 December 2000
PlacePerth
Decision Pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the decision of the Social Security Appeals Tribunal of 24 July 2000, under review, is affirmed.
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Senior Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – applicant awarded lump sum compensation for damages – preclusion period imposed – whether lump sum amount constitutes "compensation" – whether payment made wholly or partly in respect of lost earnings or lost capacity to earn – whether special circumstances – whether appropriate to treat the whole or a part of the lump sum payment as not having been made
Social Security Act 1991 ss17(1), 17(2), 17(3), 17(5), 1163(3), 1165(1A), 1165(7), (8) & (9) and 1184(1)
Re Ivovic and Director-General of Social Services (1981) 3 ALN No. 61;
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 296-297
Secretary, Department of Family and Community Services and Dujmovic [2000] AATA 208
REASONS FOR DECISION
15 December 2000 Mr R D Fayle, Senior Member
This is an application to review a decision of the Social Securities Appeals Tribunal of 24 July 2000. That tribunal affirmed the decision of the respondent's authorised review officer to impose a preclusion period during which the applicant could not claim disability support pension for which he was otherwise qualified.
At the hearing the applicant was represented by Mr Jeremy Malcolm, Solicitor. Mr Steve Ellis, an advocate with Centrelink's Advocacy and Administrative Law Team represented the respondent. The applicant gave evidence. The Tribunal had before it the documents filed by the respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("T documents").
BackgroundThe applicant migrated to Australia from Italy in 1952. He began employment as a labourer in a country town of Western Australia before working as a welder, firstly in an industrial area near Perth and later in Kalgoorlie. He has never married and has no dependants. He was able to save and from his capital began what he termed "wheeling and dealing", which the Tribunal understands to have been various speculative investments including stock market dealing, buying motor vehicles at auction and selling them after detailing and land and property speculation. Apparently he was quite successful in these pursuits from about 1980 onward until he incurred significant losses in the October 1987 stock market crash. It was about that time that he was involved in a motor vehicle accident and injured his neck which required treatment and caused him to have to give up his physical work as a welder. He continued, despite the stock market crash, to speculate but probably not anywhere near the level as before. His evidence was somewhat hampered by a lack of clear recollection of actual events or of dates and times. He moved to Sydney in about 1990 and in 1991 or thereabouts went on a trip to Italy. Whilst there he suffered angina and was diagnosed as having heart problems. He was offered an opportunity to have a correcting operation in Italy but chose rather to return to Australia where he underwent a successful operation to repair his mitral valve. Apparently he no longer has any effects from the cause of that illness although he is on daily medication which is essential for his well being.
The applicant's trouble began when some two years later he was diagnosed with kidney stones. That resulted in him having to undergo a kidney operation on 6 August 1991 which, it seems, resulted in the loss of a kidney, 44 days in a coma and many related complications which continue to cause him problems impacting adversely on his health generally and his quality of life. He now has a full-time carer to assist him in his day to day activities.
In relation to the applicant's gainful employment and income earning activities over the years, the Tribunal finds, on the evidence, that:
the applicant was fully employed until his car accident some time in 1986 or 1987;
that between the time of his car accident and his heart operation in February 1991 the applicant was actively speculating;
that the applicant was not actively speculating for the period following his sojourn to Italy in February 1991 until returning to Australia in June 1991;
that following his kidney operation August 1991, the applicant was too ill to do any work for a period but after a while he speculated in stocks and shares, property and motor vehicles albeit on an ad hoc basis; and
since the applicant's settlement in November 1999, he continued those speculative activities but has more recently given them up on advice from his doctor.
It was as a result of the kidney operation in 1992 that in November 1999 the applicant received a lump sum payment of $200,000 after legal costs. On 1 November 1999 a judge of the District Court of Western Australia, ordered, by consent of the parties, that judgment be entered for the applicant. It provided that the applicant be paid the sum of $200,000, the defendant pay the applicant's costs and that parties be granted liberty to apply in respect of reserved costs. No trial took place and the Tribunal understands that the consent order occurred proximate to when the trial was scheduled to begin. At all material times the applicant had legal representation.
As a result of the respondent notifying the defendant by letter of 23 November 1999 (T11) it received $40,610.42, being the amount of social security payments (that is, disability support pension) received by the applicant for the period from 6 August 1991 to 8 February 1996. That amount was deducted from the payment remitted to the applicant in relation to the compensation lump sum mentioned.
The issuesThe issues before the Tribunal are twofold. First, whether the respondent has acted according to law to determine that there is an amount of compensation to be repaid. Secondly, if so, whether some or all of the compensation amount should be treated as not having been received or not liable to be made, for the purpose of calculating the amount to be repaid. There was not otherwise any question of quantum.
Relevant legislative provisionsThe relevant legislative provisions are contained in the Social Security Act 1991 ("the Act"). These are set out below.
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;
'lump sum preclusion period' means either an old lump sum preclusion period within the meaning given by subsections 1165(3) to (4) (inclusive) or a new lump sum preclusion period within the meaning given by subsections 1165(5) to (8) (inclusive), as the case requires.
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; and
(f) made either within or outside Australia.
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.
17.(5) A person receives compensation whether he or she receives it directly or whether another person receives it, on behalf of, or at the direction of the first person.
1163.(3) If the compensation is a lump sum compensation payment, the compensation affected payment might cease to be payable for a period (based on the amount of the lump sum) and some or all of the payments of compensation affected payment might be repayable.
Note 1: Under section 1163A, certain lump sum payments may be treated as though they were received as periodic payments.
Note 2: 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.
1165.(1A) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person is not a member of a couple; and
(c) the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period.
Note 1: For new lump sum preclusion period see subsections (5) to (8).
Note 2: A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B).
1165.(7) If neither subsection (5) nor (6) applies, the new lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of earning capacity began; and
(b) ends after the number of weeks worked out under subsections (8) and (9).
1165.(8) If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
Income cut-out amount
Note 1: For compensation part of lump sum, see section 17.
Note 2: For income cut-out amount, see section 17.
1165.(9) If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number.
1184.(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.
The submissions
The applicant's representative made two in principle submissions. It was submitted that having regard to the evidence, it was apparent that the settled sum of $200,000 did not include any amount in respect of lost earnings or lost capacity to earn. In the alternate, if the lump sum did include an amount for those factors then the amount would be insignificant (de minimus) and should be ignored. Therefore, he submitted, the lump sum is not "compensation" as defined in s17(2) of the Act. His alternate submission is that the respondent should have treated some or all of the lump sum compensation payment as not having been made or not liable to be made because of the special circumstances applying in this instance to the applicant. Those special circumstances, it was submitted, are that the amount of the lump sum was so weighted against any of it being attributed to a loss of earnings or of earning capacity that it would be manifestly unfair to apply the s17(3)(a) to determine the hypothetical compensation part of the settlement.
The respondent's representative on the other hand, submitted that s17(3)(a) is a mandatory provision and applies in cases where it is apparent that any part of a compensation payment is in respect of lost earnings or lost capacity to earn. He submitted that the evidence, particularly the documents at T14, point to a reasonable conclusion that the lump sum consent judgment sum of $200,000 includes an amount for lost earning or lost capacity to earn as a direct result of the kidney operation (for which the compensation was ordered). He further submitted that having reached that conclusion and to then apply the provisions of s1184 in such a way as to ignore that fact, which he submitted is what the applicant is asking, would be to counter the very purpose for which the mandatory test of s17(3) was enacted. He submitted that the objective test in s17(3) cannot be overridden by a subjective analysis of what might have been the basis of arriving at the global settlement and then applying the result of that analysis. He further submitted that the effect of s17(3) is to avoid that kind of subjectivity and that s1184 is not concerned with how the payment may have been negotiated but with the impact of other ex-post factors on the recipient of the compensation payment. He further submitted that in the present case it is common ground that the applicant is not suffering any financial hardship nor can it be said that there are any factors which make the applicant stand out from the general body of social security recipients, so it cannot be said that there exists any special circumstances as contemplated by s1184.
ReasonsThe Tribunal was referred by the applicant, in support of his submissions, to the decision in Secretary, Department of Family and Community Services and Joe Dumovic, [2000] AATA 208 (17 March 2000). As in the present case, one of the issues in Dumovic was whether a lump sum payment paid in settlement of a claim for damages constituted "compensation" as defined in s17(2) of the Act. In the course of his reasons Senior Member Hotop considered the Federal Court of Australia decision in Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349 (von Doussa J). At p361 his Honour said that the task of the Tribunal, in determining whether a lump sum payment constitutes "compensation" (as statutorily defined) in a case like the present is "to apply in a sensible way the words of the definition to the primary facts as found, drawing inferences as fairly (arise) from those facts". In the course of his reasons his Honour said, in this respect (p.362):
"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 weigh. 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."
In the present case there were formal particulars of claim against the Board of Management of Fremantle Hospital submitted on behalf of the applicant on 16 April 1999 prior to the scheduled trial and before the settlement reached on 1 November 1999. These appear at T14, (pages 57 to 68 inclusively and 71 to 72) and are summarised as below:
Plaintiff's schedule of future medical expenses 27,008.82
Plaintiff's schedule of gratuitous services
Past gratuitous services 142,888.21
Future gratuitous services 136,836.00
Plaintiff's schedule of past economic loss 131,515.90
Plaintiff's schedule of future economic loss 30,368.00The schedule of past economic loss includes the following statements in support:
"(5) The Plaintiff intended to return to his income producing ventures after recovering from his kidney operation. The Plaintiff claims that he would have been likely to commence earning an income from 1 July 1992.
(6) … The Plaintiff claims past economic loss at the rate of $292.00 per week for the period from 1st July 1992 [date of operation] to the 19th April 1999 [date of claim] a period of 6 years 42 weeks totalling $103,368."
The schedule of future economic loss (T14, p.71-72) contains the following statement:
"The Plaintiff's claims that his income producing ventures would not have ceased upon him reaching the age of 65 years" (p.72)
There is no other evidence as to how the actual lump sum settled amount of $200,000 plus costs, was arrived at by the parties. It was submitted on behalf of the applicant that as he was in receipt of disability support pension at the time of his kidney operation he then had no earning capacity. However, the applicant's evidence points to a different conclusion. That he did carry on some speculative trades prior to the operation and tried, for a time thereafter before giving up that occupation in more recent times.
For the above reasons the Tribunal concludes that the lump sum of $200,000 settled by consent on 1 November 1999 was "compensation" as that term is defined in s17(2) of the Act. That being so, the "compensation part" of the lump sum has been correctly calculated by the respondent pursuant to s17(3)(a) of the Act.
The next issue therefore is whether there exists and "special circumstances for the purpose of s1184(1) of the Act so that part of the compensation payment can be treated as not having been made. In Dujmovic the Tribunal said in the present context:
"The 'special circumstances' discretionary power conferred by s1184(1) of the Act and its statutory predecessors has been considered in numerous decisions of the Federal Court and the Tribunal. The tenor of those decisions is that, before it may become appropriate to exercise that discretionary power, the circumstances of the particular case must be special, in the sense of unusual, uncommon or exceptional, such that the application of the relevant 'compensation recovery' provisions in Pt 3.14 of the Act will produce a result that is, in relation to the person concerned, unjust, unfair, unreasonable, or otherwise inappropriate, having regard to the purpose or object of Pt 3.14 of the Act, namely, to ensure that a person is not entitled to receive both compensation payments and social security payments in relation to the same incapacity for work: see, for example Re Ivovic and Director-General of Social Services (1981) 3 ALN No. 61 at pp.N96-97; Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3; Secretary, Department of Social Security v Smith (1991) 30 FCR 56 at 58-63; Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 296-297. The effect of an exercise of the discretionary power conferred by s1184(1) will be to alleviate such injustice or unfairness by treating the whole or a part of the relevant compensation payment as either not having been made or not liable to be made, as the case may be. The effect of treating part of the compensation part of the compensation payment as not having been made or not liable to be made is that the preclusion period, during which certain categories of social security are not payable to the recipient pursuant to s1165 of the Act is rendered inapplicable and, accordingly, there is no such preclusion period: Haidar (above) at p290."
It was submitted on behalf of the applicant that upon proper consideration of all the circumstances, the consent judgment sum of $200,000 contained no provision for economic loss or alternatively at best, nominal provision for economic loss. The Tribunal understands the submission in this regard to be that in practical terms as no part of the sum of $200,000 can be apportioned reasonably to economic loss, then it would be manifestly unjust or unfair to treat any part of it as compensation for loss of earnings or loss of earning capacity.
However, in the Tribunal's opinion, the evidence does not support the applicant's contention in this regard. Indeed, as already noted, the evidence supports the contrary view. In any event, the Tribunal finds considerable merit in the respondent's submission, which the Tribunal understands to be that once it can be concluded objectively on the facts that at least some part of the lump sum compensation payment was to compensate for loss of earnings or loss of earning capacity then it would be contrary to proper administrative decision making to then exercise a statutory discretion to counter that objective conclusion. This submission implies that for the discretion conferred by s1184 to be exercised favourably then the "special circumstances" must go to other aspects of the claimant's circumstances - for example, the claimant may have no visible means of support as a result of unforseen events outside the claimant's control occurring since the settlement payment.
In the present case the applicant had legal representation at all material times in relation to his claim for damage. The evidence is that his legal advisers were aware of the "preclusion period" and its effect on any settlement money received. Whether the applicant fully understood the import of those circumstances is not known. However, in the present case the repayment of the previously received disability support pension during the lump sum preclusion period was in no way unusual, nor were the negotiations relating to the actual lump sum settled amount. And it is an agreed fact that to the extent that it may be relevant the applicant is not suffering any financial hardship relative to other social security recipients generally.
For the above reasons the Tribunal finds that there are no special circumstances which would support the exercise of a discretion pursuant to s1184 of the Act to treat the whole or a part of the compensation payment as not having been made.
DecisionPursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the decision of the Social Security Appeals Tribunal of 24 July 2000, under review, is affirmed.
I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R D Fayle, Senior Member
Signed: Wendy Treasure
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AssociateDate of Hearing 27 November 2000
Date of Decision 15 December 2000
Counsel for the Applicant
Solicitor for the Applicant Mr Jeremy Malcolm
Counsel for the Respondent
Solicitor for the Respondent Mr Steve Ellis
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