IRENE HART and SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
[2012] AATA 659
•28 September 2012
[2012] AATA 659
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/0099
Re
IRENE HART
APPLICANT
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
RESPONDENT
Decision
Tribunal Mr P Wulf, Member
Date 28 September 2012 Place Brisbane The Tribunal affirms the decision under review.
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Mr P Wulf, Member
Catchwords
SOCIAL SECURITY – Pensions, benefits and allowances – Settlement of compensation claim – Lump-sum compensation payment – whether claim fell within exception – whether included component that could be considered for economic loss – Imposition of preclusion period – Special circumstances not established – Decision under review affirmed.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 37
Social Security Act 1991 (Cth) ss 17, 94, 1164, 1169, 1170, 1184K
Cases
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9
Department of Social Security v Smith (1991) 23 ALD 277
Director-General of Social Services v Hales (1983) 47 ALR 281
Groth v Department of Social Security (1995) 40 ALD 541
Nguyen and Secretary, Department of Family and Community Services (2004) 80 ALD 642
Re PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381
Re Secretary, Department of Social Security and Beel (1995) 38 ALD 736
Re Secretary, Department of Family and Community Services and Jones [2003] AATA 505
Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348
Secretary, Department of Social Security and Jan McFetrish [1998] AATA 367
Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1
REASONS FOR DECISION
Mr P Wulf, Member
28 September 2012
introduction
Irene Hart ("the applicant")[1] seeks the review of a decision made by Centrelink on 13 June 2011[2] to recover $25,839.86 following the imposition of a preclusion period after she settled a compensation claim on 2 June 2011. An Authorised Review Officer affirmed the decision on 17 November 2011.[3]
[1] Exhibit 1, T-document 1/1-2.
[2] Exhibit 1, T-document 18/66-67.
[3] Exhibit 1, T-document 22/72-79.
On 23 November 2011, the applicant appealed to the Social Security Appeals Tribunal which affirmed the original decision of Centrelink to recover $25,839.86.[4]
[4] Exhibit 1, T-document 2/3-8.
The applicant has applied to this Tribunal for review of the decision. For the reasons as stated below, this Tribunal affirms the decision under review.
The issues for the Tribunal’s determination
The issues for the Tribunal's determination are whether:
(a)the settlement payment was one which fell within those included in s 17 of the Social Security Act 1991 (Cth) ("the Act"); and, if so
(b)Did the settlement payment contain any amount for economic loss; and, if so
(c)Was it correct to impose the preclusion period (1 March 2004 to 18 November 2007) with respect to the compensation settlement received on 2 June 2011; and, if so
(d)Are there any special circumstances allowing for all or part of the relevant period to be disregarded; and, if so
(e)Should the Applicant be required to repay $25,839.86 with respect to the preclusion period?
legislation
The relevant legislative provisions are contained within ss 17, 94, 1169, 1170 and 1184K of the Act. Section 17 relates to compensation recovery and compensation affected payment definitions. It also includes the meaning of “compensation part”, in relation to a lump sum compensation payment and “income cut out amount”. In relation to a person who has received a compensation payment “income cut out amount” means the amount worked out using the formula in subs (8), as in force at the time when the compensation was received.
Section 17(2) of the Act defines what compensation means, including:
(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 and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
Section 17(2A) stated 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) either:
(i) 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; or
(ii) the agreement does so provide but the compensation payment has been calculated without reference to the provision.
Under s 1169 of the Act, compensation affected payments are not payable during a lump sum preclusion period if:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment.
Under s 1170 of the Act, the lump sum preclusion period is defined as:
(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
Specifically, in relation to the recovery of the debt and potential waiving of the debt, s 1184K of the Act allows the Secretary, and therefore the Tribunal, to disregard some payments. That section states:
(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
(2) If:
(a) a person or a person's partner receives or claims a compensation affected payment; and
(b) the person receives compensation; and
(c) the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person's or the person's partner's receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).
The evidence
The evidence before the Tribunal comprised:
(a)the "T Documents" (T1-26: pp. 1-96) lodged by the Secretary, Department of Education, Employment and Workplace Relations in accordance with s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) (Exhibit 1);
(b)Applicant's Statement of Facts and Contentions dated 13 April 2012 (Exhibit 2);
(c)Applicant's Second Statement of Facts and Contentions dated 1 June 2012 (Exhibit 3);
(d)Applicant's Bundle of Documents (Exhibit 4);
(e)Applicant's letter dated 4 July 2012 (Exhibit 5);
(f)Applicant's Third Statement of Facts and Contentions dated 31 July 2012 (Exhibit 6);
(g)Respondent's Statement of Facts and Contentions dated 30 April 2012 (Exhibit 7);
(h)Respondent's letter dated 2 July 2012 including a letter from Duncan Hutchings of WorkCover Queensland dated 29 June 2012 (Exhibit 8); and
(i)the oral evidence of the applicant.
analysis
In November 2005, the applicant was terminated by Queensland Health from her position at the Gold Coast Hospital following a demotion on disciplinary grounds in February 2005. Following the termination, the applicant filed a claim against Queensland Health on the basis that she was allegedly bullied (harassed, intimidated and victimised) by six co-workers. The claim was made for personal injuries sustained by the applicant in the course of her employment from 4 March 2004 to 11 November 2005. The applicant settled the claim on 2 June 2011 for a total amount of $312,292.44.[5] The settlement payment was split, with the applicant receiving $175,000.00 in full and final settlement of the claim along with $50,000 for costs.[6] The remaining $87,292.44 was refunded to the statutory providers.
[5] Exhibit 1, T-document 16/51-52.
[6] Exhibit 1, T-document 16/51-52.
On 9 June 2011, the applicant's solicitor wrote to Centrelink and sought details of any refund owed.[7] Centrelink determined that, as a result of the applicant's receipt of the settlement, she was subject to the relevant preclusion period and $25,839.86 was required to be paid back to Centrelink.[8] The effect of that decision was that the applicant was precluded from receiving all forms of income support payments under the Act during the preclusion period and was required to repay any pension received during that time, this being 1 March 2004 to 18 November 2007.[9]
Section 17 of the Social Security Act 1991 (Cth)
[7] Exhibit 1, T-document 17/58-65.
[8] Exhibit 1, T-document 18/66-67.
[9] Exhibit 1, T-document 18/66-67.
The applicant firstly contended that her settlement payout was related to alleged workplace bullying and therefore does not fall within the definition of “compensation” as defined in s 17(2) of the Act. Compensation means, among other things, any compensation or damages payment (whether lump sum or periodic) “that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”.
There was some debate during the hearing about whether the settlement payment was for bullying. While it is noted that the pleadings filed by the applicant in the Supreme Court[10] make statements about bullying (harassed, intimidated and victimised) by six co-workers, there is nothing in the settlement agreement that refers to this in any way. The settlement agreement only refers to the fact that the applicant sustained personal injuries in the course of her employment. Therefore, as the matter was settled on the grounds of personal injuries, and there was no finding as to any alleged bullying, the Tribunal has no option but to read the settlement agreement in its ordinary terms. On this basis, the payment is one which falls within the definition of compensation under s 17(2) of the Act and, therefore, the applicant's argument must fail.
[10] Annexure Y to Exhibit 6.
Economic loss
The applicant's second contention was that none of the payment made to her for compensation includes a component for economic loss, either past or future. It is clear within the settlement agreement that it was a lump sum payment and the payment does not separate the total quantum into the various heads of damage that would occur following litigation within a Court.
Mr Hutchings of WorkCover Queensland letter of 18 July 2012,[11] confirms that, among other things, Ms Hart's settlement payment:
[11] Annexure X to Exhibit 6.
(3)Included, in the gross settlement amount was an allowance for Future Economic Loss;
(4)Like most out-of-court settlements, the settlement amount was an “all up” figure, meaning exact figures for the various heads of damage not agreed upon by the parties. However, notionally, the breakdown of the gross settlement amount was as follows:
Head of Damage Amount Amount General Damages (pain & suffering) $50,000 Past Economic Loss $100,000 Future Economic Loss $100,000 Past Special Damages $7,500
When assessing the Amended Statement of Claim filed within the Supreme Court by the applicant,[12] it is noted that the applicant claimed the following under the relevant heads of damage:
[12] Annexure Y to Exhibit 6: Supreme Court of Queensland Number BS3582 of 2010.
Head of Damage Amount Amount General Damages (pain & suffering) – para 16 $100,000 Past Economic Loss – para 17 $188,145.64 Future Economic Loss – para 18 $250,000 Superannuation – para 19 $36,100.89 Special Damages – para 20 $15,000 Future Expenses $25,000
Like the vast majority of settlements prior to trial, the quantum paid is less than that claimed by an applicant/plaintiff. The quantum claimed in the Amended Statement of Claim for each head of damage is the best case scenario for an applicant/plaintiff and, as was the case in this matter, a plaintiff will often accept less than what was claimed as this avoids litigation and additional legal costs.
When assessing the amount claimed in the Amended Statement of Claim and the split suggested by Mr Hutchings, the Tribunal is of the opinion that while it may not be specific, the amounts suggested by Mr Hutchings are fairly consistent with a percentage paid across the various heads of damage as highlighted below.
Head of Damage Amount Percentage General Damages (pain & suffering) 50% Past Economic Loss 53% Future Economic Loss 40% Superannuation Not Specified Special Damages 50% Future Expenses Not Specified
It is noted that the majority of the amounts that the applicant settled for are approximately 50% of the amounts that she originally claimed in her law suit. If the Tribunal was to consider the applicant's suggestion that no economic loss component was included in the final settlement payment, then one could suggest that the applicant was paid almost 100% of all the amounts she claimed in the Amended Statement of Claim ($176,100.89) for the other heads of damage and nil for past and present economic loss. The Tribunal can see no logic in this argument. On this basis, the Tribunal accepts Mr Hutchings' nominal split as being extremely likely, based on the percentage splits highlighted above, and therefore the Tribunal is of the opinion that the settlement amount included both past and future economic loss as a component of the $175,000 that Ms Hart received.
A number of decisions have investigated the quantum of economic loss in settlement amounts, including for example: Re Secretary, Department of Social Security and Beel;[13] Secretary, Department of Social Security and McFetrish;[14] and Secretary, Department of Family and Community Services v Chamberlain.[15] These matters highlight the aspects of economic loss, including if it was merely a notional amount. From the above, this Tribunal finds consistent with these decisions that the settlement payment included, at a minimum, a small amount for economic loss, but more likely the sizeable quantum suggested by Mr Hutchings.
[13] (1995) 38 ALD 736.
[14] [1998] AATA 367.
[15] (2002) 116 FCR 348.
The applicant further suggested that Mr Hutchings letters[16] are a fabrication of the real payment and that he had not signed the letters. The Tribunal finds these submissions unwarranted and without foundation.
[16] Annexures to Exhibits 6 and 8.
Preclusion Period and Refund
As the applicant has received a lump sum settlement, s 17(3) has the effect of deeming 50% of the payment as the compensation part of the lump sum. An exception to this aggregation is set out in s 1164 of the Act but I am satisfied that this is not applicable to the applicant's situation. Section 1169 of the Act makes it clear that if a person receives or claims a “compensation affected payment” and a “lump sum compensation payment” then no “compensation affected payment” is payable to that person in the “lump sum preclusion period”.
The formula set out in s 1170 of the Act was applied correctly to the aggregate of her payments. I am satisfied that the amount used in applying the statutory formula was in accordance with the definition of “income cut-out amount” set out in s 17(8) of the Act. I am also satisfied that the calculation of the length of the relevant preclusion period has been properly made in the decision under review.
The purpose of the provisions relating to preclusion periods has been the subject of judicial commentary. They have been described as operating as a:[17]
… fair balance of 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.
[17] Department of Social Security v Smith (1991) 30 FCR 56 at 61 per von Doussa J.
Similarly, they have been described as a safeguard against “double dipping” in that:[18]
People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source.
[18] Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1 at 2 per Heerey J.
It is clear from the evidence that the applicant's solicitor was fully aware of the need to refund amounts from their correspondence with Centrelink.[19] Therefore, in the Tribunal's opinion, any argument as to whether the preclusion period would apply is flawed as the solicitor's correspondence is clear in this regard.
[19] Exhibit 1, T-document 17/58-65.
Notwithstanding this, the applicant contends that she was not made aware, in her dealings with her solicitor or when signing the settlement agreement, of the preclusion period or the need to pay back monies owed to Centrelink. She initially suggested that her solicitors had not advised her of the correspondence it had sent to Centrelink. She also seemed to suggest that her solicitors were negligent in their dealings with her, although there was no evidence to suggest this. She further suggested that the clauses within the settlement agreement were too broad to allow her to be fully informed as to any preclusion period that might be enforced in the future.
The Tribunal does not agree with this suggestion and believes that the applicant should have undertaken her own due diligence prior to signing the settlement agreement as to future actions. Clause 4.2(b) of the settlement agreement clearly states that the plaintiff authorises payment of the settlement sum to Centrelink. The refund of the amount is therefore consistent with the settlement agreement and the letters sent to her solicitor.
Special Circumstances
The issue of special circumstances arises in various parts of the Act. In the context of other aspects of the Act, it was observed that what is required is:[20]
… something to distinguish ... [the] … case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
[20] Groth v Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J.
That observation is equally applicable to s 1184K(1) of the Act. Accordingly, there must be something about the applicant's situation which makes it “unusual” or “uncommon” such that it distinguishes it from the ordinary or usual case.[21]
[21] Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9 per Besanko.
The applicant submitted that financial hardship is a relevant consideration in this matter. She stated that after she received the settlement payment, she was required to make payments to her family to repay them for monies she had borrowed between the time she left her position with Queensland Health and when she was paid the settlement payment. While the Tribunal notes that she had loans, this will not generally, along with the other debts she owed, constitute a special circumstance unless the financial hardship goes beyond straitened circumstances and is truly exceptional.[22] This is not, in the Tribunal's opinion, the case here.
[22] Director-General of Social Services v Hales (1983) 47 ALR 281 at 321 per Sheppard J.
The applicant also argued that additional special circumstances existed, these including her age, education status, and that she was required to make additional payments for solicitors. As to the first two, the applicant is 39 years old and finished Year 12. Therefore, in the Tribunal's opinion, these are not “unusual” or “uncommon” such that it distinguishes her from the ordinary person, particularly those wishing to find new jobs.
As to the legal costs, the applicant submitted that she had to pay about $20,360.00 for separate legal expenses. She relied on the decision of Nguyen[23] and said that these costs should be considered unusual. However, it is specifically noted that her settlement payment had a specific section related to legal costs ($50,000) and therefore the Tribunal does not consider that these fall within the realm of special circumstances.
[23] Nguyen and Secretary, Department of Family and Community Services (2004) 80 ALD 642.
The applicant also suggested that her special circumstances included that she was still sick, was over-weight, and that she was having a baby in 2013. The breadth of the discretion in s 1184K(1) of the Act is such as to accommodate health problems and an inability to return to work. It is not an unusual or uncommon consequence that the compensated conditions would lead to the outcomes described by the applicant[24] and the Tribunal is satisfied that they are not sufficient in order to enliven the discretion under s 1184K(1) of the Act.
[24] See PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381.
DECISION
I am satisfied that the compensation payment is not one that is exempt under the Act, that there was a component with respect to economic loss in the payment, that the preclusion period was correctly assessed, and that there are no circumstances, either individually or in conjunction with each other, that are special such as to meet the requirements of s 1184K(1) of the Act.
The Tribunal therefore affirms the decision under review.
39. I certify that the preceding 38 (thirty-eight) paragraphs are a true copy of the reasons for the decision herein of Mr P Wulf, Member.
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Associate
Dated 28 September 2012
Date of hearing 6 August 2012 Applicant In person Advocate for the Respondent Rick McQuinlan
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