Kallios and Secretary, Department of Social Services (Social services second review)
[2016] AATA 175
•24 March 2016
Kallios and Secretary, Department of Social Services (Social services second review) [2016] AATA 175 (24 March 2016)
Division
GENERAL DIVISION
File Number
2015/1057
Re
John Kallios
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member N A Manetta
Date 24 March 2016 Place Adelaide The Tribunal affirms the decision under review.
........... [Sgd] ....................................................
Senior Member N A Manetta
CATCHWORDS
SOCIAL SECURITY- receipt by applicant of lump sum damages including amount for future loss of earning capacity – age pension preclusion period imposed and debt raised - applicant claiming solicitors had not followed instructions – applicant claiming refund of debt as of right or in exercise of Secretary’s discretion- s 1184K(1) – decision affirmed.
LEGISLATION
Social Security Act, 1991 (Cth), ss 17, 1169 and 1184K
CASES
Re Fuller and Secretary, Department of Family and Community Services [2004] AATA 615; 83 ALD 152
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60.
REASONS FOR DECISION
Senior Member N A Manetta
24 March 2016
This is an application by Mr John Kallios for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 18 February 2015. In that decision, the SSAT affirmed an earlier decision made in the Respondent’s Department that Mr Kallios should repay a sum of $3022.00 received by him under the Social Security Act, 1991 (the Act). Mr Kallios maintains that he ought not to have been required to repay this sum. At the hearing Mr Kallios represented himself; Mr Parker appeared for the Respondent.
I set out below the background facts. I shall then set out the legal issues and my decision. To aid Mr Kallios’ understanding of my decision, I shall express matters as simply as I can.
BACKGROUND FACTS
Mr Kallios, who was born in 1943, left school early and commenced a varied working life. In 1980, he began work as a taxi-driver. He gave up full-time taxi-driving in 2008, and from then on worked part-time. In 2008, at age 65, he qualified for the age pension and kept Centrelink informed of his part-time earnings.
In September 2009, he gave up driving altogether given his health, which prevented him from lifting weights. He decided to volunteer in his local church community. In 2012, he was informed that he needed a police clearance to work with elderly residents at (what I understand to be) a retirement home associated with his church. It came as a shock to him when SA Police supplied an inaccurate record wrongly recording a serious conviction against his name. He gave evidence that he became anxious and depressed as a result of the error, and he decided to seek legal redress from the Commissioner of Police for the psychological injury suffered by him.
He engaged the firm of Johnston Withers to pursue the matter. By letter to the Commissioner of Police dated 18 February 2014,[1] Johnston Withers sought a sum of $30,050.00 in relation to the psychological harm Mr Kallios had suffered. The sum was broken down as follows:
·Damages for Pain and Suffering Scale 10 points $15,050.00
·Past Loss of Earnings $100 per week with $10,000.00
respect to taxi driving,
being 2 years at $100per week[1] Exhibit R1, T7, pp 76-78.
·Future Loss of earnings Assuming 1 year $ 5,000.00
TOTAL $30,050.00
In addition, a Medicare reimbursement and his legal costs were claimed.
By letter dated 17 April 2014,[2] a solicitor in the office of the General Counsel of SA Police, Mr Baldacchino, wrote to Johnston Withers. He specifically asked for disclosure of documents in support of Mr Kallios’ claim for past and future loss of earnings. He also put forward a counter offer of a lump sum of $8000.00 (plus Medicare reimbursement and reasonable legal costs agreed in advance of settlement). That letter was forwarded to Mr Kallios by Johnston Withers with a covering letter suggesting Mr Kallios meet with them (that is, Johnston Withers) to discuss the offer. The letter requested Mr Kallios to bring to his appointment the evidence relating to past and future loss of earnings.[3]
[2] Part of Exhibit A5.
[3] Part of Exhibit A5.
Mr Kallios strongly disputes that he ever gave instructions to Johnston Withers to seek damages for past or future loss of earnings. He gave evidence that at the time of the injury he was completely unfit to engage in taxi-work given his health problems. It is accepted, however, that he did sign a “discharge and release” agreement dated 3 September 2014 witnessed by his solicitor at Johnston Withers, Mr Mitchard.[4]
[4] Exhibit A1.
The agreement recorded the settlement of his claim against the SA Police. The settlement sum was recorded in a schedule to the agreement in the following terms:
SETTLEMENT SUM: Fifteen thousand one hundred and forty dollars $15,140.00 only
(Which sum is inclusive of any costs, disbursements, GST, interest, outstanding special damages and any statutory charge or repayment) being a figure made up of:
1. $12,640.00 damages: AND
2. 2,500.00 costs and disbursements
as outlined in the letter from Mr Mitchard dated 14 August 2014. [emphasis added]
This part of the schedule refers to a letter dated 14 August 2014 from Mr Mitchard of Johnston Withers. The first page only of that letter, which was addressed to Mr Baldacchino, was received by the Tribunal in evidence.[5] It refers to Johnston Withers having reviewed the letter with their client. It says relevantly:
“We are otherwise instructed to make a further offer of $12,640 with respect to damages. This takes into account reimbursement of costs from the previous matter, in addition to a small allowance for economic loss on a loss of chance basis and an amount for non-economic loss for [sic] the scale.” [emphasis added]
[5] Exhibit R2. A full copy of the letter was not presumably available.
The letter subsequently continued:
“With respect to costs, we are instructed to claim disbursements in the sum of $2500.”
It is unfortunate that I do not have the full letter before me, but the first extract I have quoted does make it clear that some element of economic loss “on a loss of chance basis” was being put forward. It seems clear that Mr Kallios’ solicitor understood that he had instructions to settle the claim in this way.[6]
[6] I note also that Mr Baldacchino refused to amend the agreement: see Exhibit R3.
EFFECT OF SETTLEMENT ON MR KALLIOS’ AGE PENSION
The settlement had a serious consequence for Mr Kallios. Since the settlement was by way of a lump sum, and since it included a component for economic loss, the payment affected the amount he would receive by way of age pension.
This follows under the Act from the following sections. Section 17(2) sets out a definition of “compensation” for the purposes of the Act. Relevantly, it is limited to a payment that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. The lump sum payment received by Mr Kallios was “compensation” as defined in subsection (2) since it did include a component, however small, in respect of lost earning capacity. Section 17(1)(aa) defines an age pension to be a compensation-affected payment.
Section 1169 then provides, in effect, that a compensation-affected benefit (in this case, the age pension) is not payable during what is called a “lump sum preclusion period”. In determining that lump sum preclusion period, the respondent had to perform a division prescribed in section 1170(4) of the Act as follows: –
The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
Income cut-out amount
The quotient yields the number of weeks of preclusion. Section 17(3) of the Act defines the compensation part of a lump-sum compensation payment. In essence, it requires 50 percent of the lump sum to be included.
Pausing here, I note the result of Mr Kallios’ receipt of compensation in respect of a future loss of earning capacity was as follows. Fifty per cent of Mr Kallios’ total lump-sum compensation payment of $15,140.00 (or $7,570.00) was deemed to be “the compensation part of the lump sum”. A preclusion period from 31 May 2012 to 25 July 2012 was imposed. During this period, Mr Kallios had received $3022.00 in age pension. A debt was, therefore, raised for this amount. The debt was recovered from Mr Kallios.
No preclusion period would have been imposed had Mr Kallios’ claim been settled on the basis that he had no claim for past economic loss or future loss of earning capacity. In that event, he would not have received “compensation” as defined in section 17.
REIMBURSEMENT OF MR KALLIOS BY JOHNSTON WITHERS
The decision to raise the debt was made on 18 September 2014. At some time after that date, Mr Kallios dismissed his lawyers, Johnston Withers, and engaged new lawyers, Paul Kirk Roberts and Co, to pursue the matter with Johnston Withers. I do not need to set out the correspondence between the two firms. It is sufficient to note as follows: –
·Mr Kallios’ former lawyers, Johnston Withers, accepted an error had been made by them in their conduct of his claim;[7]
·Johnston Withers offered to pay Mr Kallios a sum of money which would see him recover the $3022.00 he had lost in age pension and, furthermore, which would leave him with $15,000.00 “in hand” (which Mr Kallios maintained at the hearing was always his minimum position in negotiating a settlement with SA Police);
·That offer was accepted and Mr Kallios gave evidence that he received monies from Johnston Withers to compensate him fully for the unanticipated deduction by the Respondent’s Department of $3022.00.
[7] Exhibit R5.
MR KALLIOS’ SUBMISSIONS
Mr Kallios submits, first, that the Respondent had no authority to raise a debt against him in the first place, and that he should be repaid $3,022.00 by the Respondent. Secondly, as I understand his submission, Mr Kallios also claims the statutory “special circumstances” power in s 1184K of the Act should be exercised in his favour to waive the debt of $3022.00. This would result in the Respondent repaying to him this sum. This was appropriate in Mr Kallios’ submission, notwithstanding the monies he has received from Johnston Withers.
I now turn to consider these two submissions. In respect of the first submission, Mr Kallios asserts a claim as of right to a refund. I am satisfied, however, that the Respondent had legal authority to calculate a preclusion period and raise a debt against Mr Kallios. Mr Kallios pressed me with a submission that had Johnston Withers acted according to his instructions, no claim for economic loss would have been pursued, and the amount of $3022.00 could not have been required of him by the Respondent. His point is that the Respondent ought not to keep monies to which it had had no entitlement in the first place.
In my opinion, however, the Respondent properly raised a debt against Mr Kallios given the discharge and settlement agreement. The agreement has not been set aside in a legal action or revoked or amended[8] by the parties to it. To the contrary, it remains legally effective. It ended Mr Kallios’ claim against the SA Police on the terms contained within it. Indeed, Mr Kallios sought reimbursement from Johnston Withers on the basis that he had unfairly lost money because the agreement was valid and bound him.
[8] See Exhibit R3.
In this regard, I note that I accept that Mr Kallios’ settlement was not negotiated on the basis that a full $7570.00 of the aggregate settlement sum represented his lost future capacity to earn. Be that as it may, it is mandatory to treat 50 percent of the aggregate lump sum of $15,140.00 as the “compensation part of the lump sum”. I shall not set out relevant extracts from the authorities that make this clear: it is sufficient to note that they are collected and discussed in the decision of the President of this Tribunal, Downes J, in Re Fuller and Secretary, Department of Family and Community Services.[9] There is no room for me to depart from the statutory formula, unless I exercise the power in s 1184K in this regard.
[9] [2004] AATA 615; 83 ALD 152
This leaves the statutory power under s 1184K(1), which Mr Kallios asks me to exercise as part of his second submission. If I am to find in Mr Kallios’ favour, I must find that it “is appropriate in the special circumstances of the case” to reduce the amount of the deemed compensation part of the lump sum from $7570.00 to a lower figure or zero.
I note that I am called upon here to exercise afresh[10] the statutory power the Respondent had in this regard. In deciding whether it is appropriate to reduce the amount of $7570.00 to a lower figure, I must look at all the circumstances of the case.
[10] Re Drake v. Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60, at 68.
In my opinion, however, one factor counts overwhelmingly against Mr Kallios. That factor is that Mr Kallios has already been compensated in respect of his loss by Johnston Withers. On the basis of the agreement being legally effective against him, Mr Kallios insisted that his former lawyers compensate him for the loss he suffered as a result of their not following his instructions. He received compensation, which included payment of a sum of $3022.00 in respect of the debt raised against him by the Respondent. The exercise of the power in s 1184K(1) of the Act would result in the receipt by Mr Kallios of a windfall payment: he would be better off than he would have been had the Respondent raised no debt at all. I do not think this would be an appropriate outcome in this case.
FORMAL DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 26 (twenty -six) paragraphs are a true copy of the reasons for the decision herein of Senior Member N A Manetta .....................[Sgd]...................................................
Administrative Assistant
Dated 24 March 2016
Date(s) of hearing 26 October 2015 Date final submissions received 24 November 2015 Applicant In person Advocate for the Respondent Mr A Parker Solicitors for the Respondent Department of Human Services
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