Hotzl and Secretary, Dept of Family and Community Services
[2002] AATA 378
•22 May 2002
DECISION AND REASONS FOR DECISION [2002] AATA 378
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2001/205
GENERAL ADMINISTRATIVE DIVISION )
Re JOHN HOTZL
Applicant
And SECRETARY, DEPT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr D W Muller, Senior Member
Date22 May 2002
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
.................(Sgnd).................
Senior Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – whether special circumstances exist
Social Security Act 1991, ss 17, 1184
REASONS FOR DECISION
22 May 2002 Mr D W Muller, Senior Member
This is an application to review a decision made on 17 August 2000, as affirmed by the SSAT on 16 February 2001, to preclude John Hotzl from Centrelink income support payments for the period 7 July 1997 to 19 December 1999.
The consequence of the decision under review is that Centrelink would recover $25,454.30 in Newstart allowance from a lump sum compensation payment received by Mr Hotzl in respect of work-related injuries.
There is no dispute as to the facts. The Tribunal finds as follows:
(a)The applicant, John Hotzl, was born in Germany on the 28 August 1945.
(b)He completed his secondary education in Munich in 1963.
(c)He then became apprenticed to and subsequently qualified as a toolmaker/fitter turner/machinist. He worked in West Germany until 1971 when he travelled to Australia with his Australian fiancé.
(d)The applicant married in Australia and lived and worked in various parts of Australia as a toolmaker/fitter turner/machinist.
(e)He returned to Germany for a short period with his wife and children to help in his family's business whilst his father was ill before again returning to Australia.
(f)The applicant moved to Queensland in 1986 working in Ayr as a fitter and turner.
(g)The applicant commenced employment as a fitter/turner on a contract basis on the 27 November 1995 with Ralph M. Lee Pty Ltd. In early 1996 he continued with Ralph M. Lee Pty Ltd working as a casual.
(h)He was injured at work in a series of events, which culminated in a "last straw" injury on 25 November 1996. As a consequence he had to cease work on 10 March 1997.
(i)He underwent an operation to the left arm to rectify the problem. Unfortunately, his left arm never returned to the condition it was in before he had the problems at work in 1996.
(j)He had worked almost continuously in his trade since qualifying in 1967.
(k)He has difficulty extending his left arm and there is a noticeable loss of power and strength in his arm.
(l)He requires to use both arms to enable him to carry out his trade in an efficient and competent manner, however, due to his disability he can no longer return to his trade.
(m)He is not qualified for any other trade and as a consequence he is at great disadvantage on the open labour market. In addition, he is now experiencing problems with his lower limbs and is undergoing medical treatment with a view to diagnosing these problems.
(n)He sought work but due to the injury to his arm he has been unable to return to work.
As a result of his inability to work, Mr Hotzl has depended on workers' compensation and social security benefits to survive. He also sued his former employer for negligence, which made Work Cover Queensland a party to his action. The details of the legal actions and sums involved are:
(a)Mr Hotzl received workers' compensation until 6 July 1997. He received a total of $21,046.26 of which $16,835.38 was made up of weekly payments and the balance was for medical and rehabilitation costs.
(b)He then sued his former employer.
(c)Since the injury occurred after 1 January 1996, and because of an amendment to the Queensland Workers' Compensation Legislation, Mr Hotzl was not entitled to receive his costs of litigation in the event of being successful.
(d)Work Cover and the former employer denied liability. Consequently the matter proceeded to the District Court, held in Mackay. The trial of the matter began on 7 August 2000. The action was settled on the third day of the trial, 9 August 2000.
(e)The terms of settlement were that WorkCover and the employer pay to the applicant $135,000 inclusive of general damages, loss of income, interest, loss of superannuation, loss of future earning capacity, refunds to the Health Insurance Commission and CRS Australia, and legal costs. WorkCover did not seek a refund of the $21,046.26 already paid but made it part of the settlement. The real figure for the settlement was therefore $156,046.26.
(f)Out of the $135,000 Mr Hotzl received, he had to pay his own costs of $41,222.65. In addition he had to pay CRS Australia $3,677.90 and he had to refund to Centrelink the sum of $25,454.30 in relation to Newstart payments he had received between 10 July 1997 to 19 December 1999.
Mr Hotzl is still undergoing further medical treatment. He will never be able to return to the type of employment for which he is qualified.
The Social Security Act 1991 provides, among other things, a safety net for people who cannot work or who cannot find work, and who have no income from any other source. The Act also takes into account the fact that a person may be entitled to compensation for an inability to work from some other source, such as Workers' Compensation or from the proceeds of litigation. The Act does not allow a person to receive social security benefits for a period during which they have also been compensated for loss of income from another source. Under such circumstances the person is said to be "precluded" from accessing social security benefits for that period (the "preclusion" period).
In the case of Mr Hotzl, his lump sum payment of $135,000 included, among a lot of other things, an amount for lost earnings and lost capacity to earn. There is no way of calculating the amount attributable to lost earnings from the $135,000 because the lump sum payment was said to also include amounts to cover the other items set out in paragraph 4(e) above. It would have been a different matter if there had been a judgment from the court, which specified each head of damage.
The Act has taken away the need to attempt to calculate the quantity to be attributed to lost earnings or lost earning capacity, or to speculate on what it might have been. Section 17(3) of the Act deems the "compensation part of the lump sum" to be 50% of the lump sum.
The SSAT set out the method by which the preclusion period for Mr Hotzl was calculated. The Tribunal accepts the correctness of that method and repeats it here.
(a)Section 17(4) provides a concession to the definition of "compensation part of a lump sum". That section enables "Repaid Periodic Compensation Payment" to be deducted off the total before the 50% rule is applied pursuant to the formula "LSP-RPCP".
(b)Pursuant to the Workers Compensation Act 1995 (Qld) a worker has to refund periodic and other payments made by WorkCover to that worker from the proceeds of a common law action. This is the statutory refund.
(c)Section 17(4) of the Social Security Act 1991 enables the periodic compensation component to be taken off the compensation part of a lump sum, before the application of the 50% rule.
(d)In this case, the total refund to WorkCover was $21,046.26 of which $16,835.38 were periodic payments. Commonly, the payments made by WorkCover to a worker include medical and rehabilitation costs. Those types of costs are not considered to be "periodic" (which is undoubtedly correct).
(e)On the facts of this case, the benefit received by Mr Hotzl pursuant to the settlement was $135,000 plus $21,046.26 being the amount WorkCover had foregone in statutory refund.
(f)The periodic payments were $16,835.38.
(g)Thus, Centrelink calculated the lump sum award to be $135,000.00 plus $21,046.26 less $16,835.38. This totalled $139,210.88. Centrelink divided this figure by 50% pursuant to s 17(3) of the Act, reaching a figure of $69,605.44.
(h)Section 1165(8) of the Act sets out the method by which a preclusion period is calculated. In essence, the compensation part of a lump sum compensation payment ($69,605.44 in this case) is divided by a statutory sum, representing male weekly earnings. At the time of the settlement, that divider was $543.63. The resulting figure is the preclusion period in weeks.
(i)The calculation resulted in a preclusion period of 128 weeks.
(j)Under s 1165, the preclusion period commences from the day after periodic compensation ceases. There is no dispute that Mr Hotzl's periodic compensation was last paid on 6 July 1997.
(k)In conclusion, Centrelink applied a preclusion period of 128 weeks from 7 July 1997 to 19 December 1999.
(l)During that preclusion period Mr Hotzl had received a total of $25,454.34 in Newstart allowance. That amount was repaid to Centrelink, pursuant to a charge.
The Act takes account of the fact that in some cases strict application of the 50% rule may result in an injustice or may not be appropriate. Section 1184(1) provides:
1184(1) [Special circumstances] For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
not having been made; or
not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.It was put on behalf of Mr Hotzl that he did not receive as much by way of settlement as he should have because of the amounts he had to refund to WorkCover and Centrelink, and the substantial legal costs which he had to bear. He ultimately received $64,645.00 on 23 September 2000. It was submitted that there were circumstances in his case, which were sufficiently special to warrant a relaxation of the strict application of the provisions of the Act.
The SSAT noted the following personal details of Mr Hotzl. The details are adopted by this Tribunal for the purposes of this review.
(a)He is currently a single man aged 56 years.
(b)He owns no property and lives in rented accommodation for which he pays $25 per week
(c)He receives $470 per fortnight in Newstart allowance.
(d)He invested $40,000 of his award in a fixed term deposit for five years.
(e)He spent about $15,000 on a car, furniture and other necessaries.
(f)He has about $3,000 in his general bank account.
The end result is that Mr Hotzl has received $64,645 cash, plus $16,835.38 form WorkCover by way of periodic payments plus $25,454.34 in Newstart up until 19 December 1999, plus Newstart allowance since then. The 50% rule allowed for $69,605.44 to be attributed to living expenses between 7 July 1997 and 19 December 1999.
Under the circumstances, the Tribunal cannot see any injustice in the application of the general 50% rule. There are no circumstances in the case of Mr Hotzl, which are sufficiently special to warrant the application of s 1184(1).
The decision under review is affirmed.
I certify that the 15 preceding paragraphs are a true copy of the reasons for the decision herein of Mr D W Muller, Senior Member
Signed: .............................................................................
B. Hitchcock, Pers AsstMatter Heard on the Papers 7 May 2002
Date of Decision 22 May 2002
Solicitor for the Applicant Mr Morrin, Morrin Lawyers
Solicitor for the Respondent Mr McQuinlan, Departmental Advocate
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