Guild; Secretary, Department of Education, Employment and Workplace Relations and

[2008] AATA 92

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 92

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/0119

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Applicant

And JOHN GUILD

Respondent

DECISION

Tribunal Ms Robin Hunt, Senior Member

Date5 February 2008

PlaceSydney

Decision The decision of the SSAT is varied as to the effect of section 1171(1) of the Act and affirmed to the extent that the respondent is precluded from receiving a compensation affected payment from 16 December 2005 to 1 September 2006.

..................[Sgd]........................

Ms Robin Hunt
  Senior Member

CATCHWORDS

SOCIAL SECURITY – lump sum compensation payments – resulting preclusion from receipt of compensation affected payment – proportion of lump sum affecting calculation of preclusion period – ‘multiple’ compensation payments – determination of compensation part of payment - first sum not made in settlement of claim – second payment made in settlement of claim – consideration of event that gave rise to payment – no aggregation of payments – effect on determining compensation part - exercise of discretion in determining proportion for lost earnings.

Social Security Act 1991, ss 17(3), 1171(1)

Secretary, Department of Social Security v Banks (1990) 20 ALD 19

Savage v DEWR [2008] FMCA 32

REASONS FOR DECISION

5 February 2008 Ms Robin Hunt, Senior Member   

summary

1.      Mr John Guild has worked in the mining industry since he was aged fifteen and is now aged 64. In 2004, he received a lump sum compensation payment, which took into account a series of injuries, the last of which occurred in 2000. Mr Guild received a further sum of compensation in 2005 when he consented to the making of a final award. The Secretary consequently imposed a preclusion period preventing the receipt of social security payments or allowances for a period which was based on the total of the two lump sum payments. The Social Security Appeals Tribunal (SSAT) decided that the first payment was not relevant to calculation of the preclusion period and that 50% of the second payment was the compensation part of the payment. The Secretary sought review of that decision by this tribunal. I have decided that the outcome of the decision of the SSAT was correct.  My reasons are set out below.

issue

2.      The issue is whether the second of two compensation payments made to the respondent gives rise to a lump sum preclusion period calculated on the whole of that sum or on 50% of that sum or some other proportion of the payment.

consideration and findings

3. Legislation involved in making this decision includes subs-s 17(2), (3) and (5A) and ss 1169 and 1171 of the Social Security Act 1991 (the Act). For a payment to be compensation for the purposes of the Act, under subs 17(2) of the Act, the payment must be made wholly or partly in respect of lost earnings or lost capacity to earn. If a person receives a lump sum compensation payment, under s 1169(1), that person is not entitled to receive certain social security payments or allowances for a period known as the lump sum preclusion period.

4.      Mr Guild received two compensation payments, the first in 2004 and a second amount of $50,000 in December 2005. Mr Guild accepts that he is precluded from making a claim for certain pensions and allowances for a period calculated in relation to 50% of $50,000, on the basis that this amount should be taken as paid for lost earnings.

5.      Initially, the Secretary argued that the two payments made to Mr Guild should be aggregated for calculation of the lump sum preclusion period. However, by the time of the tribunal hearing, the Secretary conceded that the first payment made to Mr Guild should not be included in the calculation of the preclusion period as it was not received by way of settlement of his claim.

6. I agree that the first payment should not be aggregated with the second. The first payment was not made by way of settlement but was made in accordance with a court order. The judgment of Justice Truss of the District Court of NSW is very explicit about the components of the award of damages made. Her Honour sets out Mr Guild’s precise injuries or ‘events’ compensated. These are an event on 23 June 1992 to Mr Guild’s back, on 24 November 1987, 26 February 1988 and 2 July 1988 to Mr Guild’s left knee, on 24 September 1997 to both knees and 18 February 2000, to his right knee. Justice Truss also sets out in detail the amount of compensation she found appropriate for each injury or incident. The whole of the compensation is awarded for the injuries and related costs, such as medical expenses and legal costs. The judgment makes absolutely no award for lost earnings or lost capacity to earn. It follows that the amount does not come within s 17(2) and does not give rise to any preclusion period under section 1169(1).

7.      Subsection 17(3), paragraphs (a) and (ab), provide that the compensation part of a lump sum compensation payment, that is, a payment made by way of settlement, is 50% of that sum. As Mr Guild received $50,000 when he consented to the making of an award on 16 December 2005, the usual application of the legislation would result in 50% of this award being the relevant compensation part of the sum for calculation of the preclusion period. Mr Guild’s solicitor has submitted that this result is correct and accepts the SSAT’s finding to this effect. This treatment is not out of step with the usual treatment of a lump sum payment comprising various components as discussed in the case of Secretary, Department of Social Security v Banks (1990) 20 ALD 19. Although this case concerned an earlier version of the 50% rule, similar principles still apply.

8.      The SSAT found that the compensation part of this payment was 50% of $50,000 and went on to work out the number of weeks making up the preclusion period, using the formula in section 1170(4). This is a straightforward finding but, before applying the usual 50% rule, I have considered another line of argument put to me by the Secretary’s counsel.

9. The Secretary has asked me to apply section 1171(1) to the lump sum payment before deciding how much of the payment is in respect of lost earnings or lost capacity to earn. This provision deals with a deemed lump sum arising from separate payments in relation to the same “event”. Where (a) a person “receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of compensation”, and (b) “at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn”, the person is taken to have received one single payment of an amount equal to the sum of the multiple payments.

10. Section 1171(1) is, like section 17(3), an avoidance provision designed to overcome the device of splitting compensation payments in order to attract a lesser operation of the 50% rule to lump sum payments. The Secretary has not accused Mr Guild of this motive and it is plain that he did not set out on such a course. The first lump sum payment was the result of an order of a court and the second lump sum payment was a comparatively modest amount in return for which Mr Guild gave away any further rights and entitlements. The second amount was agreed a year later and was set out in a consent to redemption document and short minutes of order.

11.     Nevertheless, the Secretary argues that the subsection applies because there have been two payments in relation to the same event and at least one of these, being the $50,000 payment, is wholly or partly for lost earnings. Firstly, I have considered whether the two payments were “in relation to the same event”. The judgment of Justice Truss sets out allocations of compensation for a number of events before reaching a total. Only one of six events is clearly described in both the consent to redemption application and the short minutes of order to which the consent relates as well as the earlier judgment.

12.     Subsection 17(5A) explains that the term ‘event’ for the purposes of Part 3.14 of the Act means:

… the event that gives rise to a person’s entitlement to compensation for a disease, injury or condition is:

(a) if the  … injury or condition was caused by an accident – the accident; …

13. One event in this case which is common to both payments is the accident or injury which occurred on 18 February 2000. The statement of claim for the redemption order specifies this event and also refers to a schedule of injuries attached and to all injuries suffered by Mr Guild during the course of his employment. There is ample evidence before me that, although the first payment covered several events, the last accident in 2000 was an event which was compensated in both payments as one of several injuries. The Secretary contends that it is irrelevant that one of the multiple payments may have been in relation to several events not covered by the second payment. Although I have some difficulty in deciding this question on the evidence before me, I have concluded that, as there is at least one component of compensation set out in Justice Truss’s order in 2004 dealing with the accident and injury on 18 February 2000 and the same incident is part of the redemption statement of claim, this does mean that multiple payments in relation to the same event have occurred for the purpose of section 1171(1). This situation is distinguishable from that in Federal Magistrate Wilson’s judgement in Savage v DEWR [2008] FMCA 32, where he found separate payments for clearly separate events are not covered by this provision. Therefore, I find Mr Guild is taken to have received one lump sum compensation payment of an amount equal to the sum of the multiple payments, in accordance with section 1171(1).

14. The Secretary, fortunately, no longer takes the view that the whole of the deemed single payment forms the basis for application of the 50% rule under section 17(3). In my view, sections 1171(1) and 17(3) do not interact in such a way as to apply the 50% rule to the whole of Mr Guild’s receipts. This cannot be the result where the first payment contained no element of compensation for lost earnings and the mischief addressed in section 1171(1) has not occurred. To find otherwise in this case would produce an unjust and unintended result.

15. The Secretary argues that, having made this finding, I should find that the whole of the lump sum payment of $50,000 is for lost earnings rather than apply the usual 50% rule. This would mean a longer preclusion period applies to Mr Guild. The argument, as I understand it, is that subsection 17(3)(a) and (ab) do not apply to the lump sum payment because the payment concerned is a single payment due to the application of section 1171(1) and part of this notional payment resulted from a judgment. Taking note of the precondition in paragraphs (a) and (ab) that the amount concerned is the result of a settlement, I find that, as part of the deemed single payment is not from a settlement, I must determine the compensation part of the lump sum under subsection 17(3)(b).

16.     The further argument advanced for taking the whole of the lump sum payment of $50,000 as compensation for lost earnings is that the short minutes of order for the payment of that sum set out in clause 1 that the liability of the employer to make weekly payments in respect to the injuries in the statement of claim may be redeemed in whole by the payment of $50,000. 

17.     I am not convinced that this is the only basis for the order. The terms of the order, as well as the form of consent to the redemption signed by Mr Guild, include redemption of liability under various sections of the Workers’ Compensation Act 1926 (NSW) as amended and liability for any injuries arising out of the employment, medical expenses and other matters.

18. Subsection 17(3)(b) provides that where the circumstances outlined in the previous paragraphs do not apply, so much of the payment as, in the Secretary’s opinion, is for lost earnings or capacity or both, is the compensation part of the lump sum. In my opinion, only a portion of the sum of $50,000 is in respect of lost earnings or the like. The references in the statement of claim for this sum on which the consent and the short minutes of order are based as well as the actual short minutes of order refer to various injuries and indicate that overall liability for any claims was consideration for the reaching of the redemption. As there is no other indicator to assist in reaching a precise calculation or apportionment related to the various factors leading to the redemption, I consider the most apt apportionment is that usually applied under section 17(3)(a) and (ab) to settlement payments. It follows that I find 50% of the lump sum payment of $50,000 is the compensation part of the lump sum compensation payment for the purposes of calculating the number of weeks in the preclusion period.

19. Although I have disagreed with the findings of the SSAT about the application of section 1171(1), my finding as to the compensation part of the lump sum compensation payment means that the same amount is taken in calculating the preclusion period under section 1170(4). I therefore vary the decision of the SSAT to the extent that I find the two compensation payments are aggregated pursuant to section 1171(1) of the Act but affirm that part of the decision that the respondent is affected by a preclusion period commencing on 16 December 2005 and ending on 1 September 2006 rather than on 10 May 2007.

decision

20. The decision of the SSAT is varied as to the effect of section 1171(1) of the Act and affirmed to the extent that the respondent is precluded from receiving a compensation affected payment from 16 December 2005 to 1 September 2006.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Hunt

Signed: [Talaishia Collis]
  Associate

Date/s of Hearing  30 January 2008     
Date of Decision  5 February 2008
Counsel for the Applicant              Mr B Dube
Solicitor for the Applicant               Ms S Dole – Sparke Helmore Lawyers    

Solicitor for the Respondent  Mr R Higgins – Higgins & Higgins Solicitors