Gentley and Department of Family and Community Services
[2001] AATA 561
•20 June 2001
CATCHWORDS – SOCIAL SECURITY – sickness allowance and newstart allowance – payments made pursuant to insurance policy – when preclusion period with respect to lump sum amount received by applicant to begin and end – whether payments are "periodic payments of compensation" – "compensation" – decision set aside.
First Home Owners Act 1983
Health Insurance Act 1973
Income Tax Assessment Act 1936 – s 27A
Social Security Act 1947 – s 152
Social Security Act 1991 – ss 8, 17, 17(2A), 17(3A), 23, Part 3.14, Part XVII, Division 3A of Part VII, 168(3A). 168(3B), 593, 593(1A), 608, 643, 660H, 660L, 666, 670, 674, 677, 709, 710, 710(1A), 728K, 728R, 1068, 1069, 1163, 1165, 1165(1A), 1167, 1168, 1170, 1171, 1222A, 1226A, 1184
Social Security (Budget and Other Measures) Legislation Amendment Act 1993
Veterans' Entitlements Act 1986
WorkCover Queensland Act 1996 (Qld)
Federal Commissioner of Taxation v Scully (2000) 201 CLR 148; (2000) 169 ALR 459; (2000) 74 ALJR 504; (2000) (21) 4 LegRep 2; [2000] ATC 4111; (2000) 43 ATR 718
Great Western Railway Co v Helps [1918] AC 141
Hardie v Hardie [1947] VLR 79; (1946) 93 ArgLR 152
Secretary, Department of Social Secretary v Banks (1990) 23 FCR 416; (1990) 95 ALR 605; (1990) 20 ALD 19; (1990) 12 AAR 38
Secretary to Department of Social Security v Siviero (1986) 13 FCR 431; (1986) 68 ALR 147
Secretary, Department of Social Security v A'Beckett (1990) 26 FCR 349; (1990) 21 ALD 79; (1990) 12 AAR 212
Whitfield v De Lauret & Co Ltd (1920) 29 CLR 71; (1920) 27 ArgLR 249; (1920) 21 SR (NSW) 398
Workers' Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642; (1988) 81 ALR 260; (1988) 62 ALJR 561
DECISION AND REASONS FOR DECISION [2001] AATA 561
ADMINISTRATIVE APPEALS TRIBUNAL )
) Q2000/487
GENERAL ADMINISTRATIVE DIVISION )
Re TERRY GENTLEY
Applicant
AndSECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Miss S A Forgie (Deputy President)
Date 20 June, 2001
Place Brisbane
DecisionThe Tribunal:
1.sets aside the decision of the Social Security Appeals Tribunal dated 9 November, 1998;
2.substitutes a decision that the date from which the lump sum payment preclusion period operates in respect of the lump sum compensation received by the applicant from Suncorp is the date on which the loss of the applicant's earnings or earning capacity began (i.e. 29 July, 1996); and
3.remits the matter to reconsider the applicant's entitlements under the Social Security Act 1991 in accordance with this decision.
S A FORGIE
Deputy President
REASONS FOR DECISION
On 30 December, 1998, the applicant, Mr Terry Gentley, applied for review of a decision of the Social Security Appeals Tribunal ("SSAT") dated 9 November, 1998. The SSAT's decision affirmed a decision which had been made by a delegate of the respondent, the Secretary of the Department of Family and Community Services ("Secretary") on 30 July, 1998 and which had been affirmed by an Authorised Review Officer on 14 August, 1998. The delegate's decision imposed a preclusion period from 27 July, 1998 to 7 November, 1999. On 4 February, 2000, I set aside the decision of the SSAT, substituted another decision and remitted the matter to the Secretary to be reconsidered in light of that decision. On appeal to the Federal Court, Dowsett J ordered by consent that the matter be remitted to the Tribunal.
At the hearing, Mr Gentley was represented by Mr Mumford of counsel and the Secretary by his advocate, Mr Walsh. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") were admitted in evidence together with a report by Dr McCombe dated 27 January, 1999, eight pages of print outs from Centrelink's computer records and a questionnaire prepared by Centrelink and addressed to Australian Family Assurance Ltd ("AFA") together with AFA's response. Regard was also had to the oral evidence given in the previous hearing by Mr Gentley and Dr McCombe, who is an orthopaedic surgeon.
THE ISSUE
The issue in this case is whether the preclusion period with respect to the lump sum amount Mr Gentley received from Suncorp should commence on the day after he received his last periodic payment under his policy of insurance with AFA (i.e. 26 July, 1998) and end on 7 November, 1999 or whether it should start on 29 July, 1996 when his loss of earnings or loss of earning capacity began. The submissions at the hearing identified the resolution of the issue as depending upon whether Mr Gentley was in receipt of periodic compensation payments. That in turn turns on whether periodic payments made by AFA under a policy of insurance to Mr Gentley are "compensation" within the meaning of s. 17(2) of the Social Security Act 1991 ("the Act").
BACKGROUND
There was no disagreement between the parties regarding many of the facts in this case. In light of that and on the basis of both the oral and written evidence, I have made a number of findings of fact which I will set out in the following paragraphs.
At all relevant times, Mr Gentley was insured under a Group Income Protection Policy with AFA ("the policy").
On 26 February, 1996, Mr Gentley was injured in the course of his employment in a motor vehicle accident. Following the accident, he was treated at hospital. Mr Gentley continued to work although he sought further medical treatment in March, 1996. In July, 1996, his injuries prevented him from continuing to work and he has been incapacitated for work since 29 July, 1996. He was in receipt of sickness allowance from 30 July, 1996. On 2 August, 1996, he submitted a claim under the temporary total disablement claim of his policy with AFA. It began to give him a weekly payment on the basis that he was suffering from temporary total disablement.
On 2 September, 1996, Mr Gentley advised the then Department of Social Security ("the Department") that he was claiming compensation in respect of his personal injuries from Ms Christobel Daranay whose insurer was Suncorp (T documents, pages 15-16). On 9 September, 1996, the Department noted that Mr Gentley had made a claim under a policy of insurance which it described as a "personal policy with offset clause …" (T documents, page 29). The Department wrote to Mr Gentley on 9 September, 1996 advising him that, were he to obtain weekly payments or a lump sum of compensation, some or all of any sickness allowance might have to be repaid to the Department (T documents, pages 31-32). At the same time, it wrote to AFA advising that, should AFA become liable to pay Mr Gentley compensation, the Secretary might wish to recover an amount equal to all or part of that compensation (T documents, page 33).
In a letter dated 18 September, 1996, AFA advised the Department that it had paid Mr Gentley a benefit amounting to $372.51 for the period commencing 29 July, 1996 to 18 August, 1996. Further payments were dependent upon a medical certificate (T documents, page 34). On 23 September, 1996, Mr Gentley advised the Department that he had received a payment of $372.51 on 20 September, 1996 (T documents, page 35). An officer of the Department recorded on 4 October, 1996 that Mr Gentley received further payments of $372.51 from 30 July, 1996 until 23 September, 1996 (T documents, page 38).
In a letter dated 30 September, 1996, the Department notified Mr Gentley that it sought recovery of the sum of $1,469.51 paid as sickness allowance to Mr Gentley in respect of the period 29 July, 1996 to 25 September, 1996 (T documents, page 41). It did so on the basis that he had received periodic payments of compensation amounting to $3,203.58 in respect of the same period. The Department told Mr Gentley that it would seek recovery of the sum from the insurer (i.e. AFA). On the same day, a Recovery Notice was sent to AFA, which sent a cheque for that amount on the same day (T documents, pages 43-45).
On 14 November, 1996, Mr Gentley's solicitors wrote to the Department to ask for advice as to the amounts which had been paid as a result of the accident and which would be required to be repaid on the settlement of the claim for damages for personal injury (T documents, page 46). On 27 November, 1996, the Department replied to Mr Gentley's solicitors that it had no record of any payment that had been made to Mr Gentley and that, at that time, was liable to recovery under Part 3.14 of the Act (T documents, page 49).
On 25 March, 1997, the Department wrote to Mr Gentley's solicitors to ask them to complete a questionnaire regarding the state of his compensation claim and to remind them of the effect that a compensation payment might have on any entitlement Mr Gentley might have, or have had, under the Act (T documents, pages 54-57). Those solicitors advised that the claim was still proceeding and settlement was not expected until some nine months later (T documents, pages 58-59).
AFA considered a report of a medical examination carried out by a rheumatologist on 6 May, 1997. It concluded that Mr Gentley's condition was due to a degenerative disease of his spine that was unrelated to his motor vehicle accident. Consequently, he was no longer totally disabled as a result of his injuries. It ceased to pay him weekly payments of compensation from 2 May, 1997 on the basis that he was no longer suffering temporary total disablement.
On 3 June, 1997, the Department wrote to Mr Gentley to confirm that he had telephoned it about claiming sickness allowance and enclosed the relevant form (T documents, pages 60-61). Mr Gentley returned that form to the Department on 12 June, 1997 (T documents pages 62-70). In a questionnaire forming part of the claim form, Mr Gentley was asked from whom he was claiming compensation. He completed two such questionnaires. In one, he stated that he was claiming compensation from Suncorp and that the insurer was Suncorp. He gave the name of his solicitors and said that compensation payments had ceased on 4 May, 1997 although he did not indicate a weekly amount for those payments (T documents, pages 71-72). In the other questionnaire, he stated that he was claiming compensation from AFA and that its insurer was Suncorp. In addition, he gave the name of his solicitors (T documents, page 73). On the following page, he stated that he had been receiving periodic compensation payments of $375 each week but that payments had ceased on 4 May, 1997 (T documents, page 74).
On 19 June, 1997, Mr Gentley lodged a claim for newstart allowance (T documents, pages 76-82). He referred to his accident, the consequent injuries to his left shoulder, spine and right hip and the difficulties he experienced with walking, bending and lifting. On 24 June, 1997, Mr Gentley was granted newstart allowance with effect from 3 June, 1997 (T documents, page 83).
Later, on 20 August, 1997, Mr Gentley telephoned the Department to advise that AFA had declined to pay him further benefits under the policy. He told the Department that he had lodged an appeal against AFA's decision (T documents, page 84). On 28 August, 1997, the Department advised Mr Gentley that he would no longer be exempt from the activity test for his newstart allowance and that he would need to satisfy all the requirements of that test from 11 September, 1997 (T documents, page 85).
Mr Gentley's solicitors then wrote to the Department on 22 October, 1997 requesting an estimate of the charge and preclusion period upon the basis of a settlement figure of $45,000.00 and upon the basis that Mr Gentley's loss of capacity to earn commenced on 29 July, 1996. Settlement was expected on 24 October, 1997. The Department estimated that the start of the preclusion period was 29 July, 1996 and that its end would be 17 August, 1997 and that Mr Gentley would be required to pay the sum of $2,001.78 to the Department (T documents, pages 90 and 95). Mr Gentley's solicitors advised him of the defendant's offer to settle his claim for $45,000.00 and of the requirement that he refund to the Department the sum of $2,001.78 (T documents, pages 96-97).
On 15 December, 1997, the General Insurance Claims Review Panel decided to restore Mr Gentley's weekly benefit with effect from 6 May, 1997. It did so on the basis that Mr Gentley continued to satisfy the requirement in AFA's policy that he suffer from "temporary total disablement". (T documents, pages 97-98)
On 6 January, 1998, Centrelink wrote to Mr Gentley to ask him to complete two questionnaires regarding his compensation claims. One concerned his claim with AFA and the other his claim with Suncorp (T documents, pages 100 and 103-106). At Mr Gentley's request on 8 January, 1998, his payments of newstart allowance were stopped with effect from 1 January, 1998 (T documents, pages 101 and 117).
Mr Gentley then received a payment of $10,653.78 from AFA. That represented the arrears of weekly payments from 30 June, 1997 to 14 January, 1998. In a letter dated 14 January, 1998, Centrelink (which had by then been given the Department's role in matters of administration under the Act) advised Mr Gentley of the effect of his receiving the sum of $10,653.78 (T documents, pages 118-119). It advised him that the sum represented a payment of arrears of periodic compensation payments in respect of the period 30 June, 1997 to 14 January, 1998. As he had received the sum of $4,964.68 as social security payments in that period, Mr Gentley was advised by Centrelink that he was required to repay that sum to it (T documents, page 118). AFA paid that sum to Centrelink under cover of a letter dated 20 January, 1998 (T documents, page 122). Its receipt was acknowledged by Centrelink in a letter dated 18 February, 1998 to Mr Gentley. Centrelink went on to advise Mr Gentley that the sum was "…in full payment of our charge, for injuries sustained … on 26 February 1996" and that "Therefore, there is no further payment required by you, or Australian Family Assurance Ltd., in relation to this matter, and the file has now been finalised." (T documents, page 129)
On 1 April, 1998, Mr Gentley's solicitors requested an estimate of the social security charge and preclusion period were he to receive a lump sum of $52,500.00 on 6 April, 1998 and no periodic payments of compensation had been made since Mr Gentley became incapacitated for work on 29 July, 1996. The estimated charge amount was $4,927.61 and the preclusion period estimated to begin on 1 July, 1997 and to end on 21 September, 1998 (T documents, page 132). A further estimate was requested by Mr Gentley's solicitors on 2 April, 1998 when they advised that the date to which the periodic compensation was last paid was 14 January, 1998. The estimated preclusion period began on 15 January, 1998 and ended on 7 April, 1999 with there being no estimated charge amount (T documents, page 133).
In a letter dated 2 April, 1998, his solicitors advised Mr Gentley that his claim had been settled. The basis of the settlement was that AFA would pay $55,000.00 to Mr Gentley together with party and party costs excluding the costs of an adjournment. Mr Gentley was to receive a minimum of $28,760.00. His solicitors also advised him that the preclusion period would not expire until 7 April, 1999 and that, until that time, Mr Gentley would not be entitled to any benefits from Centrelink (T documents, page 135). Also on 2 April, 1999, his solicitors advised Centrelink of the settlement and that economic loss was a component in it (T documents, page 136). They asked Centrelink to advise them of any statutory refund amount due to it and whether or not there was any preclusion period. On 6 April, 1998, Suncorp's solicitors wrote to Centrelink to confirm the settlement and also asked to be advised of any amount refundable to that office (T documents, page 137).
On 9 April, 1998, Centrelink wrote to Mr Gentley advising him that the preclusion period would start from 15 January, 1998 and end on 28 April, 1999 (T documents, pages 138-139). During that time, he would not be able to receive social security payments. The method of calculating the preclusion period was set out on the back of the letter. His solicitors were informed of the preclusion period in a letter from Centrelink dated 14 April, 1998 (T documents, page 141). They were also advised that no charge was recoverable for the period 15 January, 1998 to 28 April, 1999. Suncorp's solicitors were also advised that no sum was recoverable from it under Part 3.14 and/or Part XVII and/or Division 3A of Part VII of the Act (T documents, page 140).
On 20 April, 1998, Centrelink wrote again to Mr Gentley and said that his matter had been reconsidered at his request (T documents, page 142). The preclusion period set out in its letter of 9 April, 1999 was incorrect and a 67 week preclusion period should be applied with effect from the day after weekly compensation payments ceased. As Mr Gentley was still in receipt of weekly compensation payments, the date of the commencement and conclusion of that preclusion period could not be calculated. A similar letter was sent to Mr Gentley's solicitors on the same day (T documents, page 145). This was followed by the decision of 30 July, 1998 specifying the preclusion period (see paragraph 1 above).
THE POLICY
The policy with AFA stated that it:
"… provides for the payment of benefits if an Insured Person becomes disabled, dies or suffers from certain conditions in accordance with the Terms and Conditions of this Policy. … All cover is subject to the payment of premiums and the terms, conditions, provisions and exclusions of the Policy which includes the current Schedule and Benefit Certificate." (T documents, page 24)
It went on to provide that:
"In consideration of the payment of all premiums due under this Policy we [AFA] will pay the Insured the Benefit referred to in the Schedule upon the happening of an event specified in the Benefit Schedule." (sub-clause 2(i), T documents, page 25)
An insured's cover under the policy ceased immediately upon his or her attaining the age of 65 years or of discontinuing service with the Principal named in the Policy Schedule (Sub-clause 2(iv), T documents, page 25).
The Benefit Schedule set out seventeen specific events and prescribed whether 100% or some lesser percentage of the Capital Benefit was payable. It then went on to specify the weekly benefits payable as a result of an injury for temporary total disablement and temporary partial disablement. In the case of the former, the amount payable was the Schedule weekly benefit or 75% of the person's gross earnings, whichever was the lesser. In the case of the latter, 40% of the amount payable for the former was payable. A similar range of payments was prescribed as the weekly benefit in cases of permanent total loss or sight of both eyes or permanent paralysis of any two limbs and for temporary total and temporary partial disablement as a result of sickness (T documents, page 28).
The policy defined the various types of disablement for which it made payments and defined the term "temporary total disablement" as:
"… disablement which entirely prevents the Insured by reason of Injury or Sickness from engaging in an occupation for which the Insured is suitably qualified by training, education or experience." (T documents, pages 24-25)
The first annual premium, or instalment of an annual premium, was due and payable in advance and calculated from the commencement date of the policy. No benefits were payable in certain situations prescribed in clause 3 of the policy.
Clause 4 of the policy set out the circumstances in which benefits would be paid while clause 5 set out that:
"(i) The Weekly Benefit for Temporary Total or Temporary Partial Disablement of an Insured shall be reduced by:
(a)the amount of any worker's compensation payment or any other statutory benefits which the Insured receives or is entitled to receive;
(b)any salary, wage or other payment receivable from any employer or principal;
(c)any entitlement under any policy of insurance, cover for which includes contingencies relating to any form of disability, permanent and total or partial disablement, injury, accident, sickness or absence from work rendering the Insured unable to carry out duties normally undertaken in connection with an Insured's usual occupation or business;
(d)amounts to the value of income an Insured receives or is due to receive as a consequence of letting out, hiring or sub contracting the business and/or plant and equipment of the business." (T documents, pages 26-27)
LEGISLATIVE FRAMEWORK
Qualifications for sickness allowance and newstart allowance
There is no question that Mr Gentley qualified for a sickness allowance under the Act and, later, a newstart allowance. Among the qualifications for a sickness allowance, as they were prescribed in 1996 at the time at which he received it, are:
"(a) the person is incapacitated for work throughout the period because of sickness or an accident; and
(b)the incapacity is caused wholly or virtually wholly by a medical condition arising from the sickness or accident; and
(c)the incapacity is, or is likely to be, of a temporary nature; and
(ca) either of the following applies:
(i)immediately before the incapacity occurred the person was in employment (whether the person was self-employed, or was employed by another person, on a full-time, part-time, casual or temporary basis) and the Secretary is satisfied that, when the incapacity ends, the employment will be again available to the person (whether or not the same kind of work will be available);
(ii)immediately before the incapacity occurred the person was in full-time education and was receiving payments under the AUSTUDY scheme or the ABSTUDY scheme and the Secretary is satisfied that the person is committed to resuming full-time study under that scheme when the incapacity ends;
(d)the person satisfies the Secretary that the person has suffered, or is likely to suffer, a loss of salary, wages or other income of a similar nature because of the incapacity; or
(e) before the period begins the person has turned 16; and
(f)before the period ends the person has not turned, or is not likely to turn, pension age; and
(g)the person is an Australian resident throughout the period; and
(h)the person is in Australia throughout the period." (sub-section 666(1)).
For the purposes of this case, there are no significant differences between the section as reproduced and as it now operates.
In general terms, "work" was defined by sub-section 666(2) to mean any work which the person contracted to perform or, if he or she had no such contract, any work of a kind which he or she could reasonably be expected to perform. Subject to certain exceptions, a person ceased to be qualified for a sickness allowance if he or she received it in respect of the immediately preceding 52 weeks (sub-section 670(1)). Exceptions included situations in which the Secretary was satisfied that the person's incapacity would end within the following 52 weeks, it was caused by a chronically relapsing medical condition and the person was undergoing certain drug or alcohol abuse rehabilitation programmes (sub-section 670(2)).
Subject to exceptions that are not relevant in this case, the qualifications for a newstart allowance provide:
"(a) the person satisfies the Secretary that throughout the period the person is unemployed; and
(b)throughout the period, or for each period within the period, the person either:
(i)satisfies the activity test; or
(ii)is not required to satisfy the activity test; and
(c)if subsection 604(1) applies to the person, at all times (if any) during the period when the person is not a party to a Newstart Activity Agreement, the person is prepared to enter into such an agreement; and
(d)if subsection 604(1) applies to the person, at all times during the period when the person is a party to a Newstart Activity Agreement, the person is prepared to enter into another such agreement instead of the existing agreement; and
(e)if the person is required by the Secretary to enter into a Newstart Activity Agreement in relation to the period, the person enters into that agreement; and
(f)while the agreement is in force, the person satisfies the Secretary that the person is taking reasonable steps to comply with the terms of the agreement; and
Note: See subsection (2A) on taking reasonable steps.
(g)throughout the period the person:
(i)subject to subsection (2B), is at least 21 years of age and has not reached the pension age; and
(ii)is an Australian resident; and
(iii) subject to subsection (1A), is in Australia; and
Note: see subsection (3).
(i)the person was not in receipt of a youth allowance during the period."(sub-section 593(1)).
Both a sickness allowance and a newstart allowance remain payable for a three month period if a person is temporarily absent from Australia in order to seek medical treatment of a kind not available in Australia (section 674 and sub-section 593(1A).
Payability of sickness allowance and newstart allowance
The Act distinguishes between qualification for an allowance and the payability of an allowance. Sub-section 677(2) provides that a sickness allowance is not payable if a person's sickness allowance rate would be nil. Sub-section 608(2) makes the same provision in relation to the payment of a newstart allowance. The rate of payment of a sickness allowance is calculated according to section 709 and the rate of payment of a newstart allowance is calculated according to section 643. In the case of both allowances, the rate is calculated according to the Benefit Rate Calculator B at the end of section 1068 of the Act. Section 1068 comes within Chapter 3, which contains general provisions relating to payability and rates.
Benefit Rate Calculator B requires that a person's maximum basic rate be worked out using Module B. Added to that is the amount of any pharmaceutical allowance calculated according to Module D and any rent assistance using Module F. The total is the maximum payment rate. Once the amount of income reduction is calculated using Module G, that amount is deducted from the maximum payment rate. The resulting figure is the provisional payment rate. The rate of sickness allowance or newstart allowance is the difference between the provisional payment rate and any advance payment deduction under Part 3.16A together with any amount calculated under Module J as remote area allowance.
Module G sets out how to calculate the effect of a person's ordinary income, and that of his or her partner, on that person's maximum payment rate. The first step is to work out the person's ordinary income on a fortnightly basis. "Ordinary income" is "… income that is not maintenance income or an exempt lump sum" (sub-section 8(1)). There are various qualifications to the notion of ordinary income but they are not relevant in this case.
If a person receives a payment which is a "compensation affected payment", then regard must be had to Part 3.14 of Chapter 3 of the Act. Sub-section 1163(1) provides that:
"If a person is or may be entitled to or receives compensation, payments of a compensation affected payment to the person or the person's partner might be affected under this Part."
A "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." (sub-section 17(1)).
A "social security benefit" is defined in sub-section 23(1) to mean:
"(aa) widow allowance; or
(aab)youth allowance; or
(aac)austudy payment; or
(a)newstart allowance; or…
(c) sickness allowance; or
(d)special benefit; or
(e)partner allowance; or
(ea) a mature age allowance under Part 2.12B; or
(f) benefit PP (partnered); or(g)parenting allowance (other than non-benefit allowance)." (sub-section 23(1))
Sub-section 17(2) of the Act provides that, for its purposes, "compensation" relevantly 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."
Sub-section 17(2A) provides that:
"Paragraph (2)(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments."
Provisions relating to periodic compensation payments
Sub-section 1168(1) provides that, subject to sub-sections 1168(4), (5), (6) and (7), the rate of a person's compensation affected payment is to be reduced, in accordance with that section, for the periodic payments period if:
"(a) a person, or the person's partner, receives a series of periodic compensation payments; and
(b)the person receives or claims a compensation affected payment for the periodic payments period; and
(c)the person was not, at the time of the event that gave rise to the entitlement of the person, or the person's partner, to the compensation receiving a compensation affected payment referred to in paragraph (b)".
Note 2 to section 1168 provides that:
"if a person, or a person's partner, was, at the time of an event that gave rise to the entitlement of the person, or the person's partner, to compensation, receiving a compensation affected payment, the compensation is treated as ordinary income."
The "periodic payments period" means, in so far as it is relevant:
"(a) in relation to a series of periodic payments – the period in respect of which the payments are, or are to be, made; and
(b)in relation to a payment of arrears of a series of periodic payments – the period in respect of which those periodic payments would have been made if they had not been made by way of arrears payment.
…" (sub-section 17(1))
The effect of sub-section 1168(2) is that sub-sections 1168(3), (3A) and (3B) are to be used to work out a person's reduced rate if the rate of that person's compensation affected payment is to be reduced under sub-section 1168(1). Sub-section 1168(3) applies in cases in which a person is not a member of a couple. In those cases, the person's fortnightly rate of the compensation affected payment is reduced by the fortnightly rate of periodic compensation.
If a person's fortnightly compensation affected payments are reduced under section 1168 because of a series of periodic compensation payments,
"… those payments are not to be regarded as ordinary income of either the person or the person's partner for the purposes of this Act (apart from section 710, and section 5B of the Health Insurance Act 1973).
Note 1:For ordinary income see section 8.
Note 3:Section 710 deals with limitations on the amount of sickness allowance payable.
Note 4:Section 5B of the Health Insurance Act 1973 deals with the Disadvantaged Persons Health Scheme." (section 1171)
Up until 20 March, 1997 when it was repealed, section 710 of the Act provided that, subject to sub-section 710(1A) which is not relevant in this case:
"… if a person is qualified for sickness allowance through subparagraph 666(1)(d)(i) or 666(1A)(e)(i) (loss of salary, wages or other income of a similar nature), the rate per fortnight of the person's allowance is not to exceed the rate that, in the Secretary's opinion, is the rate per fortnight of the salary, wages or other income that the person has lost because of the person's incapacity for work."
Section 1170 provides for the situation where periodic compensation payments have been received, payments of a compensation affected payment have been made for the periodic payments period and the latter have not been reduced under section 1168. Provided the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, receiving a compensation affected payment, the Secretary may give the person a written notice. In that notice, the Secretary may determine that the person is liable to pay the Commonwealth the amount specified in the notice. The amount which may be specified in the notice is described as the "recoverable amount" and is calculated according to sub-sections 1170(3), (4), (4A) and (4B).
Of these, only sub-section 1170(3) is relevant. It provides:
"(4) If the person is not a member of a couple the recoverable amount is equal to the smaller of the following amounts:
(c)the sum of the periodic compensation payment; and
(d)the sum of the payments of the compensation affected payment made to the person for the periodic payments period."
If a person is paid sickness allowance at a rate greater than that provided by the Act, the Secretary must determine that the rate is to be reduced. He does so in accordance with section 728K. The date of effect of that determination is ascertained according to section 728R where a determination adverse to the interest of the individual is made.
A debt under section 728R is a "compensation arrears debt" for such a debt is defined in sub-section 23(1) to mean, in so far as it is relevant, "an amount that a person is liable to pay to the Commonwealth because of an adverse determination under section 146E, 185, 234, 408PB, 589, 660L, 660XJQ, 728R, 771NS, 821 or 951U." As such, it is a debt under section 1226A due to the Commonwealth.
Similar provisions found in sections 660H and 660L, when read with section 1226A, provide that the Secretary must reduce the rate of newstart allowance paid to a person if it is being paid at a rate greater than that provided by the Act. The date of his determination may be a date earlier than the determination and any debt. It is also a compensation debt for the purposes of section 1226A.
Section 1226A falls within Part 5.2 of the SS Act. Part 5.2 provides for the amounts which are recoverable under the legislation. An amount has been paid by way of a social security payment (including a sickness allowance and a newstart allowance), only becomes a debt due to the Commonwealth if, among other situations, a provision of the Act expressly provides that it is a debt (section 1222A). Section 1226A is one such provision.
Provisions relating to lump sum payments
Lump sum payments of compensation are dealt with differently from periodic compensation payments. Except in very limited circumstances, it is not treated as income (section 1167). In general terms, where a person is qualified for a compensation affected payment and either receives or has received compensation in the form of a lump sum, then the compensation affected payment is not payable for the lump sum preclusion period (section 1165).
Sub-section 1165(1A) is relevant in this case and provides:
"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."
Where periodic compensation payments are made in respect of a person's lost earnings or lost earning capacity, the "new lump sum preclusion period" is the period that:
(a)begins on the day after the last day of the periodic payments periods; and
(b)ends after the number of weeks worked out under subsections (8) and (9)." (section 1165(5))
Section 1165(6) makes provision for the situation in which a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum. Again the length of the period is determined according to sub-sections 1165(8) and (9) by dividing the compensation part of the lump sum by the income cut-out amount. The new lump sum preclusion period begins on the first day on which the person's periodic compensation payment is reduced (sub-section 1165(6)(a)). Where neither sub-sections 1165(5) or (6) apply, the length of the new lump sum preclusion period is calculated under sub-sections 1165(8) and (9) and it begins on the day on which the loss of earnings or earning capacity began (section 1165(7)).
The compensation part of the lump sum compensation payment in the formula in section 1165(8) is determined according to sub-section 17(3). Fifty per cent of the lump sum compensation payment is taken to be the compensation part of that payment if:
"(a) 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
(b)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise, on or after 9 February 1988; …".
Sub-section 17(3A) is also relevant for it provides:
"Paragraph (3)(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments."
I note that sub-section 17(3A) refers to "paragraph (3)(d)" and did so when it was inserted by the Social Security (Budget and Other Measures) Legislation Amendment Act 1993. As far as I can ascertain, there never has been a paragraph 17(3)(d) in the Act. Taken in its context and having regard to sub-section 17(2A) it seems to me that reference must have intended to be made to sub-section 17(3).
The provisions of the 50% rule in section 17 may appear to be quite arbitrary but their rationale was explained by von Doussa J in Secretary, Department of Social Secretary v Banks (1990) 20 ALD 19. His Honour, speaking in relation to a similar provision included in the Social Security Act 1947 (the "1947 Act") said:
"... The prescribed percentage (50%) of the lump sum payment made in settlement of a claim which by s152(2)(c)(i) is deemed to be the compensation part of a lump sum payment by way of compensation' should be viewed as a broad attempt to balance the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures. The paragraph seeks to eliminate double dipping in a practical way which operates effectively in a straightforward manner ..." (page 26)
Finally, I note that sub-section 1184(1) provides that the Secretary may disregard the whole or part of a compensation payment for the purposes of the compensation recovery provisions as not having been made or not liable to be made. He may only do so if he thinks it appropriate to do so in the special circumstances of the case.
CONSIDERATION
There is no question in this case that, in receiving sickness allowance and newstart allowance, Mr Gentley received compensation affected payments as that expression is defined in sub-section 17(1) of the Act.
Were Mr Gentley's payments from AFA "compensation" within the meaning of the definition in sub-section 17(2)? The term "compensation" is defined by reference to itself and to "damages". A distinction has been drawn between the notions of compensation and of damages. In general terms, compensation is paid to "make up for the loss that the …[person] has sustained" (Great Western Railway Co v Helps [1918] AC 141 at 145 per Lord Dunedin). In making up for the loss, compensation may go some way towards indemnifying a person for various losses including his or her pecuniary loss by reason of the loss of his or her ability to earn.
The notion "damages" generally includes that of compensation but may extend to exemplary damages. As Isaacs J said in Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71:
"Damages are, in their fundamental character, compensatory. Whether the matter complained of be a breach of contract or a tort, the primary theoretical notion is to place the plaintiff in as good a position, so far as money can do it, as if the matter complained of had not occurred (see per Lord Blackburn in Livingstone v. Raywards Coal Co. (1) 5 App. Cas., 25, at p.39)." (page 80)
Isaacs J described damages of this type as "compensatory damages" (page 81) but also referred to "exemplary damages" which may be awarded in some instances with the intention that they "…be punitive for reprehensible conduct and as a deterrent." (page 81; see also Knox CJ at page 77).
While the notions of "compensation" and of "damages" may overlap in practice, payments under workers' compensation legislation have always been regarded as compensation. That is so as it is paid to make up for the loss of a person's ability to earn (see, for example, Hardie v Hardie [1947] VLR 79 at 81 per Gavan Duffy J).
The payments that Mr Gentley received under the policy are more properly described as compensation than as damages. Those payments are prescribed as to their amount and payment. They are not "at large" requiring assessment and determination by the verdict of a jury or judgement of a court as could be expected if they were damages and not compensation. The payments are made in respect of the specific losses referred to in the policy and set out above (see paragraph 25 above). Taking these factors into account, I have concluded that the payments which Mr Gentley received under the policy are not "a payment of damages" within the meaning of paragraph (a) of the definition of "compensation" in sub-section 17(2).
The payments are payments which have been made under a contract of insurance but there is no evidence either in the policy or in the evidence generally that the contract was entered "… under a scheme of insurance or compensation under a Commonwealth, State or Territory law" (paragraph (b) of the definition of "compensation"). There is no requirement in the WorkCover Queensland Act 1996 (Qld) requiring an employee to enter such a contract of insurance. That legislation places the obligation to insure against injury sustained by a "worker" upon the worker's employer and not upon the worker. It follows that the payments made to Mr Gentley are not compensation within the meaning of paragraph (b) of the definition of "compensation". As the payments neither come within that paragraph nor have the character of damages, they do not come within paragraph (c).
The payments are, however, compensation. It is clear from the policy that payments were to be made to Mr Gentley if he was prevented by injury or sickness from carrying out all or some of the duties he normally undertook for his employer. The nature of the loss for which he was being compensated is a matter to which I will return. It was Mr Gentley's intention that he would receive payments under the policy if he were unable to work. They would make up, in part at least, for the loss of the salary or wages he would incur. The payments fall, therefore, within the catch-all provision in paragraph (d) of the definition of "compensation". They are "periodic compensation payments" in that they are payments of compensation made periodically and Mr Gentley has received a series of them.
That in itself is not enough to bring the payments made by AFA within the definition of "compensation". Not only must the payments be one of the four types of payments specified in paragraphs (a) to (d) of the definition of "compensation" and be paid either in a lump sum or in a series of periodic payments, they must also meet the criteria specified in paragraphs (e) and (f) of the definition. They clearly meet the criterion in paragraph (f) for they were made to him. That leaves paragraph (e) and, in particular, whether the payments were made "… in respect of lost earnings or capacity to earn" (emphasis added). If they were made in respect of those particular losses, it does not matter whether they were made wholly or partly in that respect.
What is meant by the words "in respect of"? That the expression has a very wide meaning was clear when Deane, Dawson and Toohey JJ said in Workers' Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642; 81 ALR 260:
"Undoubtedly the words 'in respect of' have a wide meaning, although it is going somewhat too far to say, as did Mann C.J. in Trustees Executors & Agency Co. Ltd. v. Reilly ([1941] V.L.R. 110, at p. 111), that 'they have the widest possible meaning of any expression intended to convey some connection or relation between the two subject-matters to which the words refer'. The phrase gathers meaning from the context in which it appears and it is that context which will determine the matters to which it extends. …" (pages 653-654; 267)
This passage was cited with approval by Gaudron ACJ, McHugh, Gummow and Callinan JJ in Federal Commissioner of Taxation v Scully (2000) 201 CLR 148 at 171). That case concerned the interpretation of paragraph (n) of the definition of an "eligible termination payment" in section 27A(1) of the Income Tax Assessment Act 1936 ("ITA"). In very general terms, a payment was an eligible termination payment if it was a payment made in respect of the taxpayer in consequence of the termination of his or her employment or a payment made from a superannuation fund in respect of the taxpayer by reason that the taxpayer was a member of that fund. There were many qualifications to these general propositions. Among those was qualifications was the exclusion of:
"consideration of a capital nature for, or in respect of, personal injury to the taxpayer, to the extent to which the amount or value of the consideration is, in the opinion of the Commissioner, reasonable having regard to the nature of the personal injury and its likely effect on the capacity of the taxpayer to derive income from personal exertion." (section 27A(1)(n))
Ms Scully was a member of her employer's superannuation fund. Three years later, she suffered a severe brain injury in a car accident and was rendered permanently incapable of undertaking any remunerative employment. A claim of total and permanent disablement was made on her behalf to the trustees of the superannuation fund and she was paid a lump sum. The Commissioner of Taxation assessed part of that sum to be an eligible termination payment for the purpose of the ITA. The issue for the Court became whether the payment could properly be characterised as "consideration of a capital nature for, or in respect of, personal injury to the taxpayer…" (section 27A(1)(n)).
The majority of the Court considered all of the circumstances attending the payment from the superannuation fund to Ms Scully. As the payment was made in discharge of its obligations to Ms Scully, the payment could be characterised as consideration but, their Honours continued:
"… the payment in this case cannot be said to be compensation for or in respect of the personal injury. Clauses 2.4.1 and 3.5.1, pursuant to which the respondent's payment was calculated, make no attempt to place a monetary value on a member's injury. They do not even provide for a formula, roughly comparable to the manner in which a court or tribunal might assess damages in a claim for personal injury, to quantify the amount of the payment. Indeed, the very similarity of the benefits for death, retirement, resignation, retrenchment and dismissal to those for total and permanent disablement deny that the purpose of a payment pursuant to cll 2.4.1 and 3.5.1 is concerned with the value of any injury sustained by an employee.
Moreover, ordinarily, it is not the purpose of superannuation schemes to compensate for personal injury, although that may sometimes be the effect of certain payments. This point is recognised in the principle that damages for loss of earning capacity in personal injury claims are not to be reduced by payments received pursuant to a superannuation scheme. In Watson v Ramsay ([1960] NSWR 462 at 463), Brereton J said:
'A superannuation scheme of the type involved here is therefore, to my mind, completely analogous to a policy of accident or sickness insurance taken out in the employee's favour with his employer instead of with an insurer. Whether paid by him wholly, or paid for partly by him and partly by his employer, it is none the less to my mind provided in consideration of his service to his employer; and where superannuation becomes payable [before] the normal retiring age, it is not payable in recognition of any injury which may have caused such retirement, or in order to alleviate any loss of earnings, thereby occasioned, or as a discretionary payment or act of grace; it is payable simply and solely because the employee has by his work bought his entitlement to it; if it were not paid, and he sued for it, the fact that he had recovered damages for his injury from his employer or anyone else could not conceivably be pleaded in bar in that action.'
His Honour's reference to insurance is almost certainly a reference to the decision in Bradburn v Great Western Railway Co ((1874) LR 10 Ex 1 at 3), where Pigott B stated:
'The plaintiff is entitled to recover the damages caused to him by the negligence of the defendants, and there is no reason or justice in setting off what the plaintiff has entitled himself to under a contract with third persons, by which he has bargained for the payment of a sum of money in the event of an accident happening to him. He does not receive that sum of money in the event of an accident happening to him. He does not receive that sum of money because of the accident, but because he has made a contract providing for the contingency; an accident must occur to entitle him to it, but it is not the accident, but his contract, which is the cause of his receiving it.'" (pages 168-169)
It is clear from this passage that there must be a careful analysis to ensure that one thing is indeed "in respect of" another. This is also apparent from the judgement of von Doussa J in Secretary, Department of Social Security v A'Beckett (1990) 26 FCR 349, given in relation to an earlier scheme of preclusion and recovery of benefits where a person had received a compensation payment. That scheme under the 1947 Act defined "compensation" in part as a "… payment received … in respect of an incapacity for work" (sub-section 152(2)(a)(iv)). Von Doussa J considered the scheme of the 1947 Act and concluded that the object of the scheme was to prevent a person from having an entitlement to receive payments from two sources for the same inability to work. There did not need to be an actual coincidence of the time for which the person is entitled to receive compensation for an incapacity for work and the receipt of payments under the 1947 Act. There was a concept of presumed coincidence. His Honour continued:
" That the legislation should embody a notion of matching periods during which payments from the two different sources are made or to be made is a reflection of the object of the legislation to avoid double payments for an inability to exercise an earning capacity. It would be contrary to this object to deprive a person otherwise entitled to a pension during a period when there was no coincidence (or presumed coincidence) between payments from the two sources. In such cases there would be no overlapping of benefit.
In my opinion the intention of the scheme for preclusion and recovery is to prevent double payments arising from that part of a payment by way of compensation which is fairly to be characterised as damages or compensation for an incapacity for work. I consider the words 'in respect of an incapacity for work' in the definition in s 152(2)(a) mean simply 'for an incapacity for work'. I do not think it is possible or helpful to try to further define the words in isolation from factual situations where it is sought to apply the definition."
(pages 359-360)
Von Doussa J considered whether any payment by way of compensation that is related to a disease or injury should be regarded as being "in respect of an incapacity for work". He said:
"…The construction would negate the evident intent of the words which is to require as an element of the definition of 'a payment by way of compensation' a relationship between the payment and an incapacity for work. Such a relationship is fundamental to the scheme …
In my opinion a payment for medical expenses would not be a payment 'in respect of an incapacity for work' within the meaning of s 152(2)(a). If a sum for medical expenses were determined by curial decision, and not by settlement, so that s 152(2)(c)(ii) applied in lieu of the arbitrary provisions of s 152(2)(c)(i), the sum would not be one properly to be included in 'the compensation part of a lump sum payment by way of compensation' as one in respect of an incapacity for work. …" (page 360)
The precise provisions of the scheme of preclusion and recovery under the Act in its present form differ a little from those of that under the 1947 Act. Even so, the approach of von Doussa J remains applicable. Rather than considering whether the payments were made to Mr Gentley "… in respect of an incapacity for work", I must consider whether the payments were made "… in respect of lost earnings or capacity to earn" and must do so by having regard to the context in which those words are used in the Act and the circumstances in which the payments were made to Mr Gentley. The object of the scheme is similar to that under the 1947 Act. It is to prevent a person from receiving certain payments under the Act when he or she receives payments that may be characterised as compensation for his or her loss of earnings or capacity to earn.
May the payments made to Mr Gentley under the policy be properly characterised as being "… in respect of lost earnings or capacity to earn"? That depends on the scheme of the policy. The effect of the policy is that AFA will pay the insured the benefit prescribed in its schedule upon the happening of an event prescribed in that schedule. Having regard to the events, this means that AFA will be liable to pay under the policy upon an insured's suffering an injury set out in that schedule or suffering temporary total disablement, temporary partial disablement or permanent total disablement or, in the case of the insured's loss of sight or permanent paralysis of any two limbs, permanent total loss. Liability is specifically excluded in certain circumstances (e.g. deliberate self-infliction of an injury or result of war) and limited by the insured's remaining under the age of sixty five years and continuing in the service of the Principal named in the policy schedule.
The definitions of "temporary total disablement" and "permanent total disablement" are both expressed in terms of an insured's being prevented by injury or sickness from engaging in an occupation for which he or she is suitably qualified. The expression "temporary partial disablement" is defined in terms of an insured's being unable to carry out a substantial part of the duties that he or she normally undertakes in his or her usual occupation or business. There is a distinction between a person's disability and any incapacity for employment consequent upon that disability (Secretary to Department of Social Security v Siviero (1986) 13 FCR 431 (Keely, Fisher and Davies JJ, per Davies J at pages 442-443). The policy, however, chooses to define disablement in terms of incapacity and benefits are payable, in Mr Gentley's case, on the basis of that disablement, which was classified as a temporary total disablement.
Does payment of the benefits in respect of Mr Gentley's temporary total disablement also mean that they were paid, either wholly or partly in respect of his lost earnings or lost capacity to earn? Before I answer that question, I need to look at the manner in which the amount of benefit is ascertained under the policy. The first thing to notice is that its amount is limited. In the case of an injury, it is limited by the amount of the capital benefit or the percentage of that capital benefit prescribed in the schedule. In the case of weekly benefits for injuries or sickness resulting in temporary total disablement, it is limited by the schedule weekly benefit or 75% of the insured's gross earnings, whichever is the lesser. Temporary partial disablement is similarly limited.
The amount of the benefit is also reduced by certain sums that the insured receives. In broad terms, those amounts include worker's compensation payments, statutory benefits, salary or wages, entitlements under policies of insurance where the insured is unable to carry out his or her duties normally and amounts received as a consequence of letting out the business or its plant or equipment (see paragraph 29 above). In addition, any capital benefit payable under the policy is reduced by any other capital or weekly benefit paid in connection with the same injury.
It follows that the weekly payments to an insured for temporary total disablement and temporary partial disablement have a connection with the insured's lost capacity to earn. Even though the maximum amount payable to an insured may bear no relation to the amount of earnings, if any, lost by the insured by reason of his or her incapacity, the actual amount paid to him or her does bear such a relation. That follows from the fact that the maximum amount is reduced by, among other payments, the amount of any salary, wage or other payment made by his or her employer. If a person is incapacitated for work but does not suffer any diminution of earnings as a result, he or she will not receive a payment under the policy. That outcome is to be contrasted with the capital benefit for an event such as the loss of the use of a hand or leg where there is no such reduction and the amount paid bears no relationship to the insured's loss of earnings or of earning capacity. Having regard to the policy overall, therefore, I have concluded that the weekly payments made under it to Mr Gentley may be properly characterised as being "… in respect of lost earnings or capacity to earn".
It follows that, subject to sub-section 17(2A), the payments are compensation as that word is defined in sub-section 17(2). They are also "periodic compensation payments" in that they are payments of compensation made periodically and Mr Gentley has received a series of them.
The next issue to consider is whether the weekly payments made to Mr Gentley come within the exception to sub-section 17(2)(d). That exception is provided for in sub-section 17(2A) (see paragraph 41 above). It was agreed between the parties, and I am satisfied, that Mr Gentley, who is the recipient of the compensation payment, paid the insurance premiums for the policy. Consequently, he has made contributions towards the compensation payment he received within the meaning of paragraph 17(2A)(a).
The resolution of the issue in this case turns upon whether Mr Gentley satisfies paragraph 17(2A)(b). That paragraph requires that the agreement under which the payments were made to him (i.e. the policy) not provide for amounts being reduced or not payable because "…the recipient is eligible for or receives payments under this Act that are compensation affected payments" if the payment made to Mr Gentley was not to be treated as compensation by virtue of paragraph 17(2)(d). Does this mean that the agreement must refer specifically to the expression "compensation affected payments" or to payments of the same type as compensation affected payments? If the latter, does it mean that the agreement must not provide for any reduction in payments under the policy in respect of payments of all of the same types of all of the compensation affected payments or is it enough that it only make that provision in relation to some of them?
The specific provisions of the Act do not provide a clear resolution of these questions on their face. When regard is had to the purpose of the provisions relating to compensation as set out by von Doussa J in Banks' case, it seems to me that sub-section 17(2A) should be read as not requiring that the agreement not provide for payments to be reduced because the recipient is eligible for, or receives payments specifically described as compensation affected payments under the Act. It is enough that the agreement not make such provision for payments that may be identified as compensation affected payments under the Act however those payments are described. In this case it is not necessary to address the further questions I have raised.
That brings me to the policy held by Mr Gentley and, in particular, to sub-paragraph 5(i)(a) of the policy. Do the words "or any other statutory benefits which the Insured receives or is entitled to receive" encompass compensation affected payments under the Act and, in particular, payments of sickness allowance and newstart allowance under the Act? Sub-paragraph 5(i)(a) provides that Mr Gentley's weekly benefits were to be reduced by such benefits or by the amount of any worker's compensation payment he received or was entitled to receive.
If paragraph 5(i)(a) of the policy is intended to encompass payments of sickness allowance and of newstart allowance as compensation affected payments (and I will return to this), does the policy not provide that the amounts payable under it are reduced or not payable because the insured is eligible for, or receives payment of those payments? If sub-sections 1168(1) and (3) were to apply to the payments under the policy, the result would be that Mr Gentley's compensation affected payment would have to be reduced by the total amount of the payment he received under the policy. In so far as the amount of the payment under the policy does not exceed that amount of the compensation affected payment, Mr Gentley could not then be said to have been entitled to receive that compensation affected payment. When regard is had to the fact that he would have to repay any compensation affected payment which he did receive, he could not be said to have received that payment. In my view AFA would not, therefore, have been entitled to deduct any amount which Mr Gentley received as compensation affected payments for he neither received them nor was entitled to receive them because of the operation of the Act. Indeed, AFA did not actually make any such deduction even though it later wrote on 15 June, 1999 that it did deduct such payments.
Returning to the words of sub-paragraph 5(i)(a) of the policy, the ordinary meaning of the word "benefit" includes "… a payment or other assistance given by an insurance company, mutual benefit society, or public agency. …" (The Macquarie Dictionary, 2nd edition, 1991). If that meaning were adopted, it would mean that a payment under the policy would be reduced by any payment which the person were entitled to receive from a Commonwealth or State agency. Such payments would include Medicare payments such as benefits paid under the Health Insurance Act 1973, financial assistance under the First Home Owners Act 1983, pensions paid under the Veterans' Entitlements Act 1986, education entry payments under Division 8A of Part 2.13A of the Act, family allowances under Division 1 of Part 2.17 of the Act and a family tax payment under Division 4 of Part 2.17AA of the Act as well as payments of compensation affected payments under the Act.
Whether or not the ordinary meaning of the expression with its wide compass is to be adopted depends upon the context of the policy in which it is used. Sub-paragraph 5(i)(a) specifically refers to worker's compensation payments which, in general terms, are payments which an employer is required to pay to a person who is injured and whose injury arises out of or in the course of his employment. They are intended to "make up" in some measure for the losses incurred as a result of that injury be they losses by way of, for example, permanent physical impairment, periods of incapacity, medical expenses or salary or wages foregone. The remaining provisions of paragraph 5(i) go beyond worker's compensation payments to other types of income or payments. In general terms, those remaining provisions are concerned with income from that person's employer in the form of salary or wages (sub-paragraph 5(i)(b)), income from that person's letting out the business or plant or equipment of the business (sub-paragraph 5(i)(d)) and payments made in respect of the person's being unable to carry out his or her usual occupation or business (sub-paragraph 5(i)(c)). Those provisions do not extend to any form of income received by the person regardless of the nature of that income. They do not, for example, extend to income received from investments such as term deposits or shareholdings, gifts, prize winnings, income from the person's spouse or partner or, in the case of a business owned by the person, income from the ongoing operation of that business.
Sub-paragraphs 5(i)(a), (b), (c) and (d), when read together indicate an intention that the insured person not benefit from both AFA and from money payable by the employer or from money from another source of income available to him or her as a result of the happening of the event for which he or she is insured. Both aspects of that intention are not evident in each paragraph, however, for each deals with payments of a specific character and a particular source. Paragraph 5(i)(b), for example, is limited to any payment by the person's employer, paragraph 5(i)(c) is concerned with an entitlement under another policy of insurance and paragraph 5(i)(d) is limited to amounts received from a person who is making use of the insured's business or plant.
In view of the structure and intention of the policy, I have concluded that each paragraph is intended to deal with payments of a particular type and from a particular source and each is to be read discretely. In view of that, the words "any other statutory benefits which the Insured receives or is entitled to receive" in sub-paragraph 5(i)(a) must be read in the context of both the worker's compensation to which specific reference is made and the policy's intention as I have identified it in the previous paragraph. They must, therefore, be limited to those statutory benefits which the insured person receives as compensation for the loss which he or she has incurred as a result of the happening of the event prescribed in the schedule to the policy. They cannot be extended to any statutory benefits regardless of the reason for their being paid to the insured person.
Sickness allowance and newstart allowance are both benefits paid under a statute. Are they payments which compensate a person for his or her loss as a result of the happening of the event prescribed in the schedule to the policy? Taking first the sickness allowance, it is essential that the person's incapacity be wholly caused by a medical condition arising from sickness or accident (sub-section 666(1)(b)). There is no requirement that the sickness or accident arose out of or in the course of a person's employment. Although one of the qualifying criteria for a sickness allowance is predicated upon a person's having been employed prior to the incapacity and being able to return to that employment after the incapacity (sub-section 666(1)(ca)(i)), the person claiming sickness allowance need never have been employed at all. The person need only have been receiving AUSTUDY or ABSTUDY prior to his or her incapacity, or have been engaged in qualifying or full-time study and be committed to resuming those studies (section 666(1)(ca)(ii) and (iii)). Having regard to all of the qualifications required to obtain a sickness allowance, I have concluded that a sickness allowance is not intended to compensate a person whether as a result of the happening of the event prescribed in the schedule to the policy or otherwise. A sickness allowance is intended to maintain a person's income at a certain level temporarily when that person's income, whether it be from employment which has been temporarily interrupted or from AUSTUDY or ABSTUDY payments, has been temporarily interrupted. There is no element of "making good" or compensating for any loss which the worker has suffered. There is no element of the payments being made to compensate a person for losses suffered as a result of his or her being injured in the course of his or her employment. It matters not how the person's injury or sickness came about.
A newstart allowance also falls outside paragraph 5(i)(a) of the policy as I understand it. That allowance is predicated upon a person's being unemployed and not upon any incapacity. It has none of the characteristics of a payment of compensation. An examination of the remaining compensation affected payments under the Act shows that none of them has those characteristics.
It follows that the policy under which Mr Gentley made contributions does not provide for the amounts that would otherwise be payable to him to be reduced or not payable because he is eligible for, or receives, payments under the Act that are compensation affected payments. The payments of compensation made periodically to Mr Gentley were made under a policy coming within the parameters of sub-section 17(2A) and so are not compensation payments within the scope of sub-section 17(2)(d). They are not compensation for the purposes of sub-section 17(2). It also follows that the payments made by AFA to Mr Gentley are not periodic compensation payments for the purposes of the Act. Consequently, the preclusion period in respect of the lump sum received by Mr Gentley from Suncorp commences from the date on which the loss of his earnings or earning capacity began (i.e. 29 July, 1996).
In view of the decision I have reached on this matter, the question of whether there are special circumstances within the meaning of section 1184 is not relevant to consider.
The decision under review in this case is limited to the time from which imposition of a preclusion period as a result of the lump sum payment to Mr Gentley began. I:
1.set aside the decision of the Social Security Appeals Tribunal dated 9 November, 1998;
2.substitute a decision that the date from which the lump sum payment preclusion period operates in respect of the lump sum compensation received by the applicant from Suncorp is the date on which the loss of the applicant's earnings or earning capacity began (i.e. 29 July, 1996); and
3.remit the matter to reconsider the applicant's entitlements under the Social Security Act 1991 in accordance with this decision.
I certify that the ninety-seven preceding paragraphs are a true copy of the reasons for the decision herein of Miss S A Forgie (Deputy President)
Signed: ..........................................…..
A R Horne AssociateDate of Hearing 17 August, 2000
Date of Decision 20 June, 2001
Counsel for the Applicant Mr B Mumford
Solicitor for Applicant Welfare Rights
Advocate for Respondent Mr J Walsh
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