Glad Cleaning Service Pty Ltd v Vukelic

[2010] NSWSC 422

CITATION:	Glad Cleaning Service Pty Ltd & Anor v Vukelic [2010] NSWSC 422 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	5 February & 22 March 2010
JUDGMENT DATE :	7 May 2010
JURISDICTION:	Equity
JUDGMENT OF:	Slattery J at 1
DECISION:	ORDERS: 1.There will be judgment for the plaintiffs in the sum of $98,076.48. 2. Ms Vukelic is to pay the plaintiffs' costs of these proceedings, unless Ms Vukelic wishes to advance argument for the application of some other principle.
CATCHWORDS:	EQUITY - general principles - unjust enrichment - second plaintiff paid workers compensation settlement to defendant without deducting monies owed to the Commonwealth - Centrelink had issued a Recovery Notice to the second plaintiff requesting the payment of $63,603.12 before the payment to the defendant - the second plaintiff paid this sum to Centrelink after payment to defendant - now seeks restitution - mistake of fact or law made by the second plaintiff's claims officer - miscalculation of sum to be paid to the defendant - no defence to claim - judgment entered for the plaintiffs in the amount of $63,603.12 plus interest accrued up to judgment
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) s 100 Civil Procedure Rules 2005 (NSW) s 98 Evidence Act 1995 (NSW) s 36 Social Security Act 1991 (Cth) Part 3.14 Uniform Civil Procedure Rules 2005 (NSW) Pt 42.2 Workers Compensation Act 1987 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	ANZ Banking Group Limited v Westpac Banking Corp (1988) 164 CLR 662 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Perpetual Trustees Australia Ltd v Heparu Pty Ltd (2009) NSWSC 84 Re Groth v Secretary, Department of Social Security (1995) 37 ALD 797 Wallace Smith v Secretary, Department of Family and Community Services [2004] VSC 123
TEXTS CITED:	K Mason, J W Carter & G J Tolhurst Restitution Law in Australia (2nd ed) (2008) LexisNexis Butterworths
PARTIES:	First Plaintiff: Glad Cleaning Service Pty Limited Second Plaintiff: GIO General Limited (Formerly Known As GIO Workers Compensation (NSW) Limited) Defendant: Svetislavka Vukelic
FILE NUMBER(S):	SC 4835/07
COUNSEL:	Plaintiffs: Mr A Combe Defendant: No Appearance
SOLICITORS:	Plaintiffs: Rankin Nathan Lawyers Defendant: No Appearance

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SLATTERY J

FRIDAY 7 MAY 2010

4835/07 GLAD CLEANING SERVICE PTY LIMITED & GIO GENERAL LIMITED (FORMERLY KNOWN AS GIO WORKERS COMPENSATION (NSW) LIMITED) v SVETISLAVKA VUKELIC

JUDGMENT

1 HIS HONOUR: Glad Cleaning Service Pty Limited (“Glad”) employed Svetislavka Vukelic as a part time cleaner in 1997. On 23 August that year Ms Vukelic suffered a compensable injury to her neck, back, arms and legs in the course of her work for Glad. In October 1997 she first submitted a claim for compensation for this injury under the Workers Compensation Act 1987 (NSW). GIO General Limited (“GIO”) was Glad’s workers compensation insurer in relation to Ms Vukelic’s injury. It made workers compensation payments to Ms Vukelic on Glad’s behalf.

2 GIO, the second plaintiff, claims that in July 2004 it mistakenly overpaid Ms Vukelic $63,303.12 on behalf of Glad when making a lump sum settlement payment for her additional workers compensation rights accrued over the period December 1997-September 2003. GIO seeks recovery of this alleged overpayment from her. She resists GIO’s claim on the grounds pleaded on her behalf as defendant. GIO not Glad made the overpayment but Glad is joined as first plaintiff to bind all parties affected by the payment. The issue for the Court is whether GIO may now recover this payment of $63,303.12 plus interest from Ms Vukelic.

Background to the Claim

3 At the time of Ms Vukelic's accident in August 1997 GIO was Glad's workers compensation insurer. GIO agreed to indemnify Glad for Glad’s liability to make worker's compensation payments to Glad's employees. Following her accident Ms Vukelic claimed compensation on 20 October 1997 in respect of her injuries. GIO made weekly workers compensation payments to the plaintiff from about October 1997 pursuant to a Certificate of Determination.

The Settlement Negotiations

4 The events founding GIO’s claim occur between July 2003 and July 2004. In July 2003 Ms Vukelic lodged an application with the Workers Compensation Commission (“the Commission”) claiming weekly compensation benefits and medical expenses dating back to 10 December 1997 and continuing up to the date of filing of that application. GIO conducted Glad’s defence of the application. By late 2003 Rankin and Nathan were the solicitors acting on behalf of the GIO and in Glad’s interests. Messrs Keddies solicitors acted for Ms Vukelic.

5 The lawyers for GIO and Ms Vukelic pursued a negotiated resolution of her workers compensation rights. By early 2004 they had successfully achieved a settlement. The Commission issued an Amended Certificate of Determination on 24 February 2004 reflecting that settlement and amending the original Certificate of Determination issued in Ms Vukelic’s case on 22 October 2003. The Amended Certificate of February 2004 ordered Glad to pay Ms Vukelic a total of $109,027.43 on account of workers compensation payments for the period commencing 10 December 1997 and ending 15 September 2003. The Commission’s Amended Certificate of Determination of that date was in the following terms.

“1. The Respondent is to pay the Applicant weekly compensation pursuant to sections 36 and 37 of the Workers Compensation Act 1987 as follows:


(a) for the period 10 December 1997 to 24 February 1998, the amount of $4,125 (eleven weeks at the rate of $375 per week);

(b) for the period 25 February 1998 to 4 May 1998, the amount of $3,057 (10 weeks a the rate of $305.70 per week, no dependants);

(c) for the period 5 May 1998 to 1 October 2002, the amount of $83,528.78 (229 weeks and two days at the rate of $364.30 per week, one dependant child);

(d) for the period 2 October 2002 to 15 September 2003, the amount of $18,316.65 (49 weeks and four days at the rate of $369.50 per week, one dependant child);

(e) thereafter, to date and continuing, pursuant to section 37, weekly benefits at the statutory rate.


2. For the avoidance of doubt, it is recorded that the total amount owing in respect of weekly benefits from 10 December 1997 to 15 September 2003 amounts to $109,027.43 (being the sum of the amounts set out in subparagraph is 1(a) – (e) above).

3. The Respondent is to pay the Applicant’s expenses under section 60 of the Workers Compensation Act 1987 up to the agreed sum of $19,569.95 on production of accounts or receipts, as well as any further section 60 expenses on production of accounts or receipts.

4. The Respondent it [sic] to pay the Applicant’s costs as agreed or assessed.”

6 Calculation errors were identified in the February 2004 Amended Certificate of Determination. By 15 July 2004 the parties agreed upon an amended figure of $108,415.13 as the correct amount of the back payment of weekly compensation. An exchange of letters between the solicitors on that day recorded this agreement. In fact a slightly different amount was paid to the plaintiff, namely the sum of $108,666.69. After the deduction of tax from this sum the net amount paid to Ms Vukelic was $78,449.98.

7 As a result of the settlement Ms Vukelic received three cheques. She banked the cheques shortly after 27 July 2004. GIO’s payment system records them as being banked. She also acknowledged receipt of these cheques by signing a letter addressed to her solicitors, Keddies.

“TO: MESSRS KEDDIES
SOLICITORS
Level 1, 6-8 Holden Street
Ashfield NSW 2131

I, Svetislavra Vukelic, hereby acknowledge receipt of the following cheques:-

1.A cheque in the sum of $3,148.60
2.A cheque in the sum of $35,892.09
3.A cheque in the sum of $39,409.29

I authorise and instruct you to transfer all costs and disbursements in accordance with your Memorandum of Costs and Disbursements.

DATED:

SIGNED: a signature .
Mr [sic] Svetislavra Vukelic”

Centrelink Becomes Involved

8 During the period of Ms Vukelic’s disability Centrelink, the Commonwealth’s social security payment authority, paid benefits to Ms Vukelic. Centrelink became involved in the settlement negotiations in order to record its interest in recovering these benefits. It corresponded with both parties upon matters relevant to the claim GIO now makes.

9 When the outline of a possible settlement began to emerge between Ms Vukelic and GIO early in 2004 Centrelink wrote to Ms Vukelic. On the second day of the hearing of these proceedings, Ms Vukelic responded to an order under s 36 Evidence Act 1995 (NSW) by producing to the Court a letter addressed to her from Centrelink dated 9 January 2004. This Centrelink letter anticipated her receipt of a payment of arrears of compensation and gave her advance warning of Centrelink’s intention to recover the social security payments to her:

“Dear Ms Vukelic

Date of Injury: 23 August 1997

….

We are writing to tell you how much of your Centrelink payments have to be repaid because of your compensation payment and what arrangement have been made for this to be deducted from your compensation arrears payment.

Under Part 3.14 of the Social Security Act 1991 repayment is required if you received periodic compensation payments (eg. weekly worker’s compensation payments) for the same period that you also received social security payments.

The amount to be repaid is worked out by initially reducing the compensation recipients compensation-affected Centrelink payment on a dollar for dollar basis. If their Centrelink entitlement is reduced to nil and there is still an amount of compensation left over, that amount will affect their partners rate under the ordinary income test provisions.

However, if the compensation recipient was in receipt of a pension, benefit or allowance at the time of the accident, injury or illness, the periodic payments of compensation are to be treated as ordinary income and as such as also only subject to the ordinary income test provisions.

We have been advised that you are entitled to a payment of arrears of periodic compensation for the period form 10 December 1997 to 30 December 2003. As you have received Centrelink payments during this period, $36,596.61, being the amount of recoverable Centrelink payments you received from 10 December 1997 to 30 December 2003, is required to be paid back to Centrelink.

We have asked G.I.O. WORKERS COMPENSATION (NSW) LTD to repay $36,596.61 to us before they pay you the rest of your compensation payment. The authority to do this is under section 1184 of the Social Security Act 1991.

If you have to lodge an Income Tax Return at the end of the financial year, or if you have already lodged an Income Tax Return, please contact us at this office, so that we can issue an amended Payment Summary to you. The amended Payment Summary will show the amounts received from Centrelink payments after repayment of your compensation debt.

We also provide a financial service for our customers. The Financial Information Service (FIS) provides information that will assist both current and future customers improve their standard of living by using their own money to the best advantage. The FIS service can be contacted at your nearest Centrelink office.

If you have any questions about this letter, please phone me on the above telephone number.

Yours sincerely

W RAO
Delegated Compensation Recovery Officer
Centrelink”

10 At the time Centrelink sent this letter it appears not to have fully calculated the extent of its possible recovery against Ms Vukelic. The amount of $36,596.61 referred to in the letter of 9 January 2004 is well short of Centrelink’s final claim for repayment of $63,603.12.

11 Closer to the settlement GIO requested that Centrelink send it a Recovery Notice identifying the amount of social security payments Centrelink was claiming back for the Commonwealth. This request was made because GIO expected that Centrelink would be making such a claim.

12 On 23 March 2004 Centrelink notified the parties that it would seek to recover social security payments it had made to Ms Vukelic. Centrelink sent a facsimile to GIO on 23 March 2004 informing it that Centrelink held a charge under Part 3.14 of the Social Security Act 1991 (Cth), calculated in the sum of $63,603.12 over the settlement funds. Centrelink identified the recovery period for its charge to be in respect of social security payments made between 1 January 1998 and 30 December 2003. Centrelink informed GIO that a formal Recovery Notice would follow by mail.

13 As foreshadowed a Recovery Notice followed. This Recovery Notice, dated the same day 23 March 2004, stated that the Commonwealth proposed to recover the amount of $63,603.12 owing to it under s 1184D of the Social Security Act on account of recoverable Centrelink payments for the period 10 December 1997 to 30 December 2003. The Notice required payment within 28 days. The Notice also warned GIO:

“You should note that s 1184D of the Act, an insurer or compensation payer having received a notice under s 1184 or s 1182 of the Act must not make any payment unless they have paid to the Commonwealth the amount specified in the notice, or the Secretary has given written permission to make the payment.”

14 Centrelink followed its March 2004 communication to GIO with a letter to Ms Vukelic’s solicitors on 3 May giving a breakdown of the components of the $63,603.12 Centrelink charge.

“Keddies Solicitors
97-99 Redfern Street
REDFERN NSW 2016

Attention: Mr Tony Chow

Dear Sir,

I am writing in response to your request for a breakdown of Miss Vukelic’s compensation charge to Centrelink being partial charge to Centrelink being $63,603.12 this amount represents payments of Newstart Allowance and Parenting Payment Single that was paid to Miss Vukelic for the period 10 ^th December 1997 to 30 ^th December 2003.

The charge was calculated as a result of a backdated arrears of weekly workers compensation payments settlement from GIO>.
Below is a table of weekly workers compensation payments that were awarded to Miss Vukelic between the period 10 ^th December 1997 to 30 ^th December 2003.

376.90_____	1 WE	16 SEP2003	30 DEC 2003
369.50_____	1 WE	1 JUL 2003	15 SEP 2003
369.50_____	1 WE	2 OCT 2002	30 JUN 2003
364.30_____	1 WE	1 JUL 2002	1 OCT 2002
364.30_____	1 WE	1 JUL 2001	30 JUN 2002
364.30_____	1 WE	1 JUL 2000	30 JUN 2001
364.30_____	1 WE	1 JUL 1999	30 JUN 2000
364.30_____	1 WE	1 JUL1998	30 JUN 1999
364.30_____	1 WE	5 MAY 1998	30 JUN 1998
305.70_____	1 WE	25 FEB 1998	4 MAY 1998
375.00_____	1 WE	10 DEC 1997	24 FEB 1998


Section 1173 of the Social Security Act 1991. – Effect of periodic compensation payments on rate of peron’s compensation affected payment.

I have checked the calculation and have found it to be correct and in accordance with Section 1180.

Section 1180 of the Social Security Act 1991. – Repayment where both periodic compensation payments and payments of compensation affected payment have been received.

I have attached the list of recoverable payments for your perusal.

If you have any enquiries, please do not hesitate to contact the undersigned.

Yours sincerely
signature
N Wall
Delegate of the Secretary of the Department of Family and Community Service Compensation Management Section
One Sydney - NSW

3rd May 2004.

Cc: to Miss Vukelic.”

15 It can be inferred from the contents of this letter, “I am writing in response to your request for a breakdown", that Keddies had asked for a breakdown of the $63,603.12 so that the Commonwealth’s calculations could be analysed and if necessary challenged. This means that Keddies were aware of the size of the Centrelink claim and the impact that its deduction would have on the gross settlement payment to her.

16 Centrelink also directly notified the same information to Ms Vukelic. Centrelink also sent to Ms Vukelic personally a copy of the 3 May 2004 letter to Keddies attached to a Centrelink letter dated 7 May 2004 addressed to Ms Vukelic. The covering letter read as follows:

“Dear Miss Vukelic,

I am writing in regards to your solicitors recent request for an explanation for your charge to Centrelink in the amount of $63,603.12.

I have replied to your solicitor & have attached a copy of my response for your purposes.

If you have any questions you can contact me at the above telephone number.

Yours sincerely
signature
N Wall
Delegate of the Secretary of the Department of Family and Community Service Compensation Management Section
One Sydney - NSW

7th May 2004.”

This was not the only correspondence sent to Ms Vukelic reminding her of Part 3.14 Social Security Act 1991 (NSW) and the obligation to restore to the Commonwealth the social security payments made to her after her accident.

17 A few days later Keddies was involved in more communications about Centrelink’s claim. On 10 May 2004 Centrelink again wrote to Keddies in terms similar to its 3 May 2004 letter but attaching detailed computer printouts of the social security payments made. On 18 May 2004 Keddies faxed Centrelink’s detailed breakdown of the $63,603.12 on to Rankin and Nathan with the comment, "We look forward to our client’s settlement money in the near future". This correspondence would seem to indicate that Keddies expected that a deduction of $63,603.12 was going to be made from the settlement money.

18 Just before the settlement money was paid, on 15 July 2004 Keddies wrote to Rankin and Nathan confirming that the amount of $108,415.13 was acceptable to Ms Vukelic. The letter also said, "we kindly ask the cheques be drawn in our client's favour as follows: $108,415.13 less statutory charges and $3742.55 interest” (emphasis added). The proper inference from Keddies’ use of the expression "less statutory charges” in this letter is that Keddies expected deductions on account of either or both of any income tax payable and Centrelink recoveries.

19 Despite Centrelink’s communications with Glad and Ms Vukelic about its charge, Glad erroneously did not deduct the amount charged from its next payment to Ms Vukelic. On 27 July 2004 GIO paid the final amount of $78,449.98 net of tax as now ordered by the Commission by consent. This total erroneously included the $63,603.12 over which Centrelink had a charge. Were Centrelink’s charge deducted at the time she would only have received a net sum of $14,846.86 (being $78,449.98 - $63,603.12). GIO says that this overpayment occurred due to an administrative oversight of the GIO Claims Officer responsible for the claim at the time.

20 Mr Nenad Babic, a GIO recovery officer, explained how the administrative oversight occurred both in affidavit and oral evidence. He deposed to the operation of the GIO’s weekly compensation payment system in which payments made to recipients such as Ms Vukelic needed to be entered into the GIO’s computer system as separate entries for each period in which a different statutory rate applied. Tax was then normally calculated and deducted from the amounts to be paid to injured employees such as Ms Vukelic. He analysed the GIO’s computer system in respect of Ms Vukelic’s payments. He inferred from that analysis that income tax was calculated and deducted from her payments. He says that this explained the payment of $78,449.98 rather than the ultimately agreed gross settlement sum of $108,666.69. He says that an amount should also have been deducted from the payments to be made to Ms Vukelic for the Centrelink charge. The GIO computer system has no record of that deduction having been made. His conclusion from analysing the business records is that he believes that the GIO Claims Officer responsible for Ms Vukelic’s claim overlooked the further deductions for the Centrelink charge. His conclusion is that by reason of what he describes as “an administrative oversight” GIO did not make payment of the amount of $63,603.12 to Centrelink out of the weekly compensation payments payable to Ms Vukelic in July 2004 and that instead GIO mistakenly paid the full amount to Ms Vukelic.

21 Ms Vukelic cross-examined Mr Babic on the first day of hearing. Mr Babic explained that it was clear that “GIO made a technical mistake at that time paying the full amount”. Mr Babic made clear that he was not the GIO Claims Officer in charge of the file at the time that these errors occurred. When asked to explain why recovery action was not initiated until April 2005, Mr Babic explained that the decision to pursue the matter further was triggered by a letter from the Australian Government Solicitor seeking recovery of the money from GIO.

22 Indeed there was a gap of about seven months. On 18 March 2005, when neither GIO nor Ms Vukelic had paid the Commonwealth, the Australian Government Solicitor sent a letter to GIO requesting payment to the Commonwealth of the debt owing to the Commonwealth, pursuant to the Social Security Act. On or about 18 April 2005, GIO paid the sum of $63,603.12 to the Commonwealth in response to this demand and in satisfaction of the notice of charge.

23 Once the Commonwealth was paid, GIO informed Ms Vukelic’s former solicitors Keddies of the mistake that it had made and demanded payment of $63,603.12. GIO’s solicitors also issued a demand for payment on 28 April 2005 direct to Ms Vukelic pointing out to her that,

"You will recall that a Centrelink charge in the sum of $63,603.12 was notified to yourself and your solicitor was Keddies, and our client after proceedings for weekly compensation were determined by the Workers Compensation Commission. Our client advises us that it deducted taxation but under the mistake failed to deduct the charge when preparing the cheques to you for arrears of weekly compensation. Our client is obliged under the Social Security Act 1991 to pay the charge amount to the Commonwealth in any event. However, your client has effectively received $63,603.12 more than you were entitled to, and that our client's expense. This letter is to serve as a demand that you pay $63,603.12 to our client within 14 days of the date of this letter. If payment is not received within that time, our client will commence proceedings to recover same without further notice. Such proceedings will seek interest and costs.”

24 Ms Vukelic apparently did not reply to this letter. She was still receiving workers compensation payments from GIO. So the company’s solicitors Rankin and Nathan wrote her another letter, enclosing the letter of 28 April 2005. This letter referred to the fact that proceedings had been commenced in the District Court for recovery of the sum of $63,603.12. The letter pointed out that as Rankin and Nathan had been unable to locate Ms Vukelic after exhaustive attempts, that they would recommend that GIO discontinue payments of weekly compensation on the basis that GIO would be "unable to substantiate that [Ms Vukelic was] still alive". She was asked to treat that correspondence as notice under section 54 of the Workers Compensation Act of the proposed determination or reduction of weekly compensation payments to her. Ms Vukelic was found. She appeared at both hearing days of these proceedings.

25 GIO seeks recovery of the sum of $63,603.12 from the defendant. The issues in this case are whether GIO has a right to restitution of this sum and what defences to the claim are available to Ms Vukelic.

Legal Principles and their Application to GIO’s Case

26 GIO pleads in its statement of claim that by a mistake of fact or a mistake of law it paid workers compensation payments to Ms Vukelic on 27 July 2004 without deducting the $63,603.12 charge under the Social Security Act. GIO further pleads that it was required by law to pay the sum of $63,603.12 to the Commonwealth and that it did so. It further pleads in the circumstances that Ms Vukelic is not entitled to retain that sum and has been just unjustly enriched at the expense of GIO to that extent.

27 The common law and statutory principles applicable to GIO’s claim are not controversial. There is a common law right to restitution for unjust enrichment: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. A payment by mistake is sufficient to give rise to a prima facie obligation on the part of the payee to make restitution for unjust enrichment: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379 and ANZ Banking Group Limited vWestpac Banking Corp (1988) 164 CLR 662 at 673.

28 The existence of the mistake here is established. Mr Babic's research shows that a GIO officer apparently made an error in failing to deduct the amount of the charge when payment was made to Ms Vukelic in July 2004. His oral evidence was consistent with this conclusion. His fundamental thesis about what happened within GIO’s administration was not displaced by anything Ms Vukelic put to him in cross-examination. The available documentary evidence supports the same conclusion. It is difficult to understand why GIO did not make the deduction when the payment was made to Ms Vukelic especially given the demands that had been received from Centrelink. A mistake by the Claims Officer is the obvious explanation for the payment without deduction. I find that is what occurred.

29 The mistake made here may be able to be characterised as a mistake of fact or a mistake of law. On the available material what the GIO Claims Officer did may be characterised as a mistake of fact if that officer made an error as to whether the Commonwealth had demanded the sum of $63,603.12 from GIO. This could occur for example if the file had temporarily become unavailable to the Claims Officer and that officer then made the payment without actual knowledge of the demand. The non-payment may also perhaps be explained by the GIO Claims Officer being aware of the Commonwealth’s demand but erroneously not believing that there was a proper legal basis for satisfying that demand. This would be a mistake of law. On the available materials the former appears to be more likely. There is no evidence of GIO contemporaneously considering GIO's legal liability to satisfy the Commonwealth's demand. Even if the circumstances are characterised as a mistake of law, recovery is still possible: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353.

30 Subject to demonstrating that the Commonwealth was entitled to its charge and therefore that there truly was a mistake because the deduction should have occurred, the GIO has made out a prima facie case for restitution in this proceeding. It will then be necessary to consider Ms Vukelic’s defences.

Statutory Basis for the Deduction

31 The Commonwealth was entitled to a statutory charge in the sum of $63,603.12 over Ms Vukelic’s settlement moneys. This is evident from analysis of Social Security Act Pt 3.14, Division 4. The whole Part, Pt 3.14 Social Security Act has been described as being designed to prevent “double dipping” under the Commonwealth social security scheme: per Mandie J in Wallace Smith v Secretary, Department of Family and Community Services [2004] VSC 123 at [10]. It has also been described as ensuring that “a person is not paid from two sources in respect of the same period” Re Groth v Secretary, Department of Social Security (1995) 37 ALD 797, at 798.

32 Social Security Act Pt 3.14, Division 4 provides a mechanism for the Commonwealth to recover monies from a person who has received payments under that Act where the person has also received compensation payments from other parties such as workers compensation insurers: cf Social Security Act s 17(2) definition of ‘compensation’. The Commonwealth’s right to recover monies under this legislation covers both periodic and lump sum payments of compensation.

33 The Commonwealth’s payment recovery system under the Social Security Act creates a liability in the recipient of the social security benefit and of the compensation to repay the Commonwealth in conformity with a Recovery Notice served on behalf of the Commonwealth. Alternatively, if the Commonwealth so chooses it can issue a notice for the same sum to be paid by the workers compensation insurer or other compensation payer. The following provisions describe the operation of this mechanism.

34 Once compensation payments attract Part 3.14, Division 4 Social Security Act, the Division provides a means of recovery from the recipient as a “compensation affected payment”. It does this for lump sum payments through ss 1178-9:

1178 Repayment of amount where both lump sum and payments of compensation affected payment have been received

(1) If:
(a) a person receives a lump sum compensation payment; and
(b) the person receives payments of a compensation affected payment in relation to a day or days in the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.


(2) The amount to be specified in the notice is the recoverable amount under section 1179.

1179 The section 1178 recoverable amount

The recoverable amount under this section is equal to the smaller of the following amounts:
(a) the compensation part of the lump sum compensation payment;
(b) the sum of the payments of the compensation affected payment made to the person in relation to a day or days in the lump sum preclusion period.

35 In this case the Commonwealth relied upon s 1180, which relates to a person's obligation to repay where both periodic compensation payments and compensation-affected payments have been received. Under s 1180 the Secretary may by written notice determine that the person is liable to pay the Commonwealth the amount specified in the notice. ss 1180 and 1181 of the Social Security Act provide as follows:

1180 Repayment where both periodic compensation payments and payments of compensation affected payment have been received

(1) If:
(a) a person receives periodic compensation payments; and
(b) the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and
(c) the person receives payments of a compensation affected payment in relation to a day or days in the periodic payments period; and
(d) the payments referred to in paragraph (c) have not been reduced to nil as a result of the operation of section 1173;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.

(2) The amount to be specified in a notice for the purpose of subsection (1) is the recoverable amount under section 1181.


1181 The section 1180 recoverable amount

(1) Subject to subsection (2), the recoverable amount under this section is equal to the smaller of the following amounts:
(a) the sum of the periodic compensation payments;
(b) the difference between:
(i) the sum of the compensation affected payments made to the person in relation to a day or days in the periodic payments period; and
(ii) the sum of the compensation affected payments that would have been made to the person in relation to any such day or days had those payments been made at the rate to which the payments were reduced as a result of the operation of section 1173.

(2) If:
(a) a person is a member of a couple; and
(b) the person’s partner receives a compensation affected payment in relation to a day or days in the periodic payments period;
the recoverable amount under this section is equal to the smaller of the following amounts:
(c) the sum of the periodic compensation payments;
(d) the difference between:
(i) the sum of the compensation affected payments made to the person and the person’s partner in relation to a day or days in the periodic payments period; and
(ii) the sum of the compensation affected payments that would have been made to the person and the person’s partner in relation to any such day or days had those payments been made at the rates to which the payments were reduced as a result of the operation of sections 1173 and 1174.

These provisions are all mechanism for recovery of money from the recipient of social security benefits. In this case something different happened. Centrelink chose to issue its Recovery Notice, the instrument of demand which is authorised by the statute, to the payer of the compensation, GIO, rather than to its recipient, Ms Vukelic.

36 The Social Security Act s 1184 also provides a mechanism by which the Commonwealth may recover the quantum of its charge from the workers compensation insurer rather than from the recipient of the social security benefit. The section provides as follows:

1184 Secretary may send recovery notice to compensation payer or insurer

(1) If:
(a) a person (the compensation payer):
(i) is liable to pay compensation to a person (a claimant); or
(ii) where the compensation payer is an authority of a State or Territory, has determined that a payment by way of compensation is to be made to a claimant; and
(b) the claimant has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the compensation payer that the Secretary proposes to recover from the compensation payer the amount specified in the notice.


(2) If:
(a) an insurer is liable, under a contract of insurance, to indemnify a compensation payer against any liability arising from a person’s claim for compensation; and
(b) the person has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the insurer that the Secretary proposes to recover from the insurer the amount specified in the notice.

(3) If a compensation payer or insurer is given notice under subsection (1) or (2), as the case may be, the compensation payer or insurer is liable to pay to the Commonwealth the amount specified in the notice.

(4) The amount to be specified in the notice is the recoverable amount under section 1184A.

(5) A notice under this section must contain a statement of the effect of section 1184D so far as it relates to such a notice.

(6) This section applies to an amount payable by way of compensation in spite of any law of a State or Territory (however expressed) under which the compensation is inalienable.

The Centrelink Recovery Notice of 23 March 2004 to GIO was a notice under s1184 Social Security Act .

37 GIO paid the amount of $63,603.12 to the Commonwealth in April 2005 in response to the Commonwealth’s demand for that sum. By reason of s1184C Social Security Act that payment discharged GIO’s liability to the Commonwealth.

1184C Compensation payer’s or insurer’s payment to Commonwealth discharges liability to compensation claimant

(1) Payment to the Commonwealth of an amount that a compensation payer is liable to pay under section 1184 in relation to a person operates, to the extent of the payment, as a discharge of the compensation payer’s liability to pay compensation to the person.

(2) Payment to the Commonwealth of an amount that an insurer is liable to pay under section 1184 in relation to a person operates, to the extent of the payment, as a discharge of:
(a) the insurer’s liability to the compensation payer; and
(b) the compensation payer’s liability to pay compensation to the person.

38 But it also relieved Ms Vukelic from the Commonwealth claiming the same amount from her. Social Security Act s 1184D makes it an offence for a potential compensation payer to make a compensation payment to a person without first paying the Commonwealth the amount specified in any s1184 notice. GIO’s mistake involved it ignoring its obligations under this statutory provision, which is as follows:

1184D Offence to make compensation payment after receiving preliminary notice or recovery notice


(1) If a person (the potential compensation payer) has been given a notice under section 1182 or 1184 in relation to the payment of compensation to a person, the potential compensation payer must not make the compensation payment to the person.
Penalty: Imprisonment for 12 months.

(1A) Subsection (1) does not apply if:
(a) in the case of a notice under section 1182—the Secretary has given the potential compensation payer written notice that the notice under section 1182 is revoked; or
(b) in the case of a notice under section 1184—the potential compensation payer has paid to the Commonwealth the amount specified in the notice; or
(c) the Secretary has given the potential compensation payer written permission to pay the compensation.

(2) If an insurer has been given a notice under section 1182 or 1184 in relation to the insurer’s liability to indemnify a compensation payer, the insurer must not make any payment to the compensation payer in relation to that liability.
Penalty: Imprisonment for 12 months.

(2A) Subsection (2) does not apply if:
(a) in the case of a notice under section 1182—the Secretary has given the insurer written notice that the notice under section 1182 is revoked; or
(b) in the case of a notice under section 1184—the insurer has paid to the Commonwealth the amount specified in the notice; or
(c) the Secretary has given the insurer written permission to pay the amount.
(3) Strict liability applies to an element of an offence against subsection (1) or (2) that:
(a) a notice is a notice under section 1182; or
(b) a notice is a notice under section 1184.

39 When Centrelink gave it is its breakdown of the sum of $63,603.12 Keddies did not take issue with the amount. Keddies had both the time to do so and the detail to understand if a calculation error was likely to have occurred. There is no evidence of any dispute between Keddies and the Commonwealth about the amount the Commonwealth was claiming. It is to be inferred from the absence of dispute that the amount was accepted as correct.

40 GIO has made out a prima facie case for restitution to it of the sum of $63,603.12. It is now necessary to consider Ms Vukelic’s defences.

Ms Vukelic’s Defences

41 Ms Vukelic advanced a number of strongly felt answers to the allegations GIO made in the statement of claim. I will deal with these answers first before dealing with her pleaded defences, because these answers seemed particularly important to Ms Vukelic. The principal question is whether these answers raise recognisable legal defences to GIO’s claim.

42 Refusal of Offers of Settlement. First, Ms Vukelic said that she had tried to settle the case with GIO. She complained that her attempts to negotiate a resolution with GIO had been unsuccessful. She did not disclose any part of these settlement negotiations to the Court. Nor did GIO. Settlement communications between the parties may not be adduced in evidence Evidence Act, s 131. She complained that GIO now did not want to settle. This appeared to her to be unfair.

43 Whether or not GIO was now willing to settle these proceedings or had changed its willingness to settle the proceedings does not constitute a recognised defence to GIO’s claim. GIO is entitled to proceed with its claim to hearing. Its merits can then be judged. Of course if GIO has refused a reasonable offer of settlement from Ms Vukelic that may be a basis to deprive the GIO of an order for costs in its favour to which it would otherwise be ordinarily entitled. Whether such an offer has been refused can be considered if issues of costs are to be argued after this judgment.

44 Encouraging Maladministration. Second, the defendant seemed concerned that other persons in the community who have suffered personal injury might be treated the same way that she had been and caused unnecessary anxiety due to mistakes and maladministration by insurers. Ms Vukelic’s argument appeared to be that the Court should not find for the plaintiff in the proceedings because that would encourage insurers to make more mistakes, causing suffering to other people. Ms Vukelic’s point was that a finding for the plaintiff should not reward such mistakes. Ms Vukelic certainly seemed much distressed in the course of the hearing by her experience as a result of this mistake. What to GIO was seen as a simple example of maladministration had undoubtedly caused her great and continuing anxiety. Despite Ms Vukelic’s personal reaction to the claim, this second argument that she advances has two answers.

45 The effect of findings in this case on proceedings between other persons does not constitute a defence to GIO’s claim. Even if the result of this case is that more people become exposed to insurers’ mistakes, GIO has otherwise made out its case and is still entitled to a judgment. Also on established authority the negligence of a mistaken party claiming a restitutionary remedy is not a defence to the action for restitution based upon the mistake. Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 at 450 decides that the negligence of the plaintiff does not affect its right to recover. That the GIO Claims Officer was negligent in paying this extra amount to Ms Vukelic does not provide a defence for her.

46 No Demands. Third, the defendant said that she had not been served with any document, which showed that she had a responsibility to pay back the money now being claimed. Even if this submission were made out on the facts, it would not constitute a recognised defence to GIO’s claim for restitution. But this submission is also not in accordance with the evidence. The correspondence examined above shows that at the time of the receipt of her lump sum workers compensation settlement on or about 27 July 2004, Ms Vukelic was made aware that she had a responsibility to pay back the money now being claimed.

47 She was clearly warned in the Centrelink letter of 9 January 2004 of at least part of the amount, which she produced to the Court from her possession. This letter makes clear to her that a sum of $36,596.61 would need to be paid by GIO to Centrelink before GIO paid Ms Vukelic the rest of her compensation payment. From January 2004 she should have expected a deduction of at least this amount. Later she received the letter of 7 May 2004 from Centrelink enclosing Centrelink’s letter to Keddies of 3 May 2004. The Court can readily infer that she received these letters from the fact that both letters are attached to her affidavit of 22 August 2008 in the proceedings. Also Centrelink’s letters and Recovery Notice sent to Keddies on 23 March 2004 and 10 May 2004 were likely to have been drawn to her attention. This summary of her knowledge is also an answer to any suggestion that there is a change of position defence in this case.

48 Information from Centrelink. Fourth, the plaintiff also said that she had contacted officers of Centrelink by telephone and that they told her that the workers compensation insurers were responsible for paying the sums now in issue. She said this in evidence and repeated it from the bar table during final submissions. It is unclear whether the Centrelink employees to whom she spoke were given precise information about the circumstances of this case. This kind of general evidence about what she was told is not an answer to the GIO’s case which makes out a prima facie liability in Ms Vukelic to repay the sum demanded. Ms Vukelic’s affidavit makes a similar suggestion that in April 2005 Keddies advised her that the moneys could not be recovered. If that advice was given it was wrong.

49 It is now necessary to examine Ms Vukelic’s pleaded defences. The case was conducted flexibly so that Ms Vukelic could advance facts she thought could make out a pleaded defence.

A Change of Position Defence

50 Ms Vukelic did not clearly plead a change of position defence in her amended defence to the statement of claim. Nevertheless GIO conducted of the case on the basis that in final submissions she might allege a change of position defence arising out of the evidence adduced. This was a reasonable procedural course which took into account Ms Vukelic’s legal inexperience as a litigant in person. The reasons which follow a change of position defence must fail.

51 The defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt: David Securities Pty Ltd v The Commonwealth Bank of Australia (1992) 175 CLR 353 at 385. To establish the defence of change of position the defendant must have acted to her detriment upon receiving the payment from the plaintiff. The New South Wales Court of Appeal has recently analysed the defence in Perpetual Trustees Australia Ltd v Heparu Pty Ltd (2009) NSWSC 84 The elements of the defence are conveniently identified in K Mason, J W Carter & G J Tolhurst Restitution Law in Australia (2^nd ed) (2008) LexisNexis Butterworths to be the following at [2407], p860:

a) The onus of establishing the change of position defence, including the necessary reliance, lies upon the defendant.
b) The defence may be applied pro tanto.
c) Mere expenditure does not constitute a change of position.
d) The defence is not available where the defendant has simply spent the money received on ordinary living expenses.
e) Money spent solely in reliance on the payment, from which the defendant no longer retains a benefit, constitutes a good defence.
f) The defence is available only to those who act in good faith.
g) The expenditure made in reliance must be irreversible.

52 Ms Vukelic’s change of position defence fails on several grounds. There is no evidence that Ms Vukelic undertook any expenditure of any kind after the receipt of the settlement monies on 27 July 2004. Her affidavit does not identify or elaborate upon any such expenditure. Even if such expenditure were proved it would be impossible for Ms Vukelic to prove that it had occurred in good faith, in the sense that it was done without awareness of Centrelink’s expectation that she repay the demanded sum of $63,603.12. She had that awareness no later than 10 May 2004, well before she received the settlement monies on 27 July 2004. Accordingly, any defence of change of position fails.

53 She opened in cross examination that she received Centrelink’s letter of 9 January 2004 and that meant that GIO had to pay Centrelink before it paid her. She also agreed in cross examination that as a result of the May 2004 correspondence that she knew that the insurer had to pay Centrelink $63,603.12.

54 The amended defence takes issue with the quantum of some of the payments made to Ms Vukelic but she did not press those defences or support them with evidence in the course of the hearing before me. She did not press any other defences. The balance of her pleaded defence consisted of non-admissions.

Calculation of Interest

55 The plaintiff has provided a schedule of interest said to accrue at the rates prescribed pursuant to s 100 Civil Procedure Act 2005 (NSW) on its claim of $63,603.12 since 27 April 2004. The calculation is set out in the table below and is complete up to the date of judgment, 7 May 2010.

“Glad Cleaning Services Pty Ltd and Anor v Vukelic
SC NSW 4835 of 2007
Plaintiff’s schedule of interest




From	To	Calculation	Amount
27.7.04	3.12.06	$63,603.12 x 9% pa x 888 days	$13,926.47
1.1.07	4.3.09	$63,603.12 x 10% pa x 794 days	$13,835.85
5.3.09	07.05.10	$63,603.12 x 9% pa x 428 days	$6,711.04
Total	$34,473.36

Orders

56 The total due therefore is $98,076.48, made up of the sum claimed of $63,603.12 together with interest of $34,473.36 accrued to date under s 100 Civil Procedure Act.

57 There will be judgment for the plaintiffs in the sum of $98,076.48.

Costs

58 The usual principle for the exercise of my costs discretion under s 98 Civil Procedure Act and Uniform Civil Procedure Rules 2005 (NSW) Pt 42.2 is that costs follow the event, unless it appears to the court that some other order should be made. The order I make will be for Ms Vukelic to pay the plaintiffs’ costs of these proceedings, unless Ms Vukelic wishes to advance argument for the application of some other principle.

59 As Ms Vukelic is not present today I will direct that if she wishes to advance a costs argument, she must notify the second plaintiff and the Court by 5pm Friday 14 May 2010.

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10/05/2010	-	Incorrect judgment date - Paragraph(s) Catchwords
20/05/2010	-	Typographical errors - Paragraph(s) 40, 46