Kirkbright v Secretary, Department of Family and Community Services
[2000] FCA 1876
•21 DECEMBER 2000
FEDERAL COURT OF AUSTRALIA
Kirkbright v Secretary, Department of Family & Community Services [2000] FCA 1876
SOCIAL SECURITY – application to review decision of Administrative Appeals Tribunal – applicant received sole parent pension – applicant later awarded lump sum compensation payment for loss of earning capacity which covered a portion of the period in which he had already received sole parent pension payments – respondent determined that social security payments made during this period should be recovered – applicant contended that special circumstances, within the meaning of s 1184(1) of the Social Security Act 1991 (Cth), existed that made it appropriate to treat all or part of the compensation payment as not having been made – consideration of the meaning of ‘special circumstances’ – consideration of policy behind s 1184 – whether the Tribunal erred in its application of the provisions.
Social Security Act 1947 (Cth)
Social Security Act 1991 (Cth) ss 17(1), 17(3), 152, 156, 1165, 1165(1A), 1165(7), 1165(8), 1184
Groth v Secretary, Department of Social Security (1995) 40 ALD 541 referred to
Re Beadle and Director General of Social Security (1984) 6 ALD 1 referred to
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1 referred to
Haidar v Department of Social Security (1998) 157 ALR 359 applied
Department of Social Security v Smith (1991) 30 FCR 56 applied
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 applied
Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090 referred toGRANT ANDREW KIRKBRIGHT v SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
S 95 OF 2000
MANSFIELD J
21 DECEMBER 2000
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 95 OF 2000
BETWEEN:
GRANT ANDREW KIRKBRIGHT
APPLICANTAND:
SECRETARY, DEPARTMENT OF FAMILY
AND COMMUNITY SERVICES
RESPONDENTJUDGE:
MANSFIELD J
DATE OF ORDER:
21 DECEMBER 2000
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.Application granted.
2.Decision of Administrative Appeals Tribunal made on 22 March 2000 set aside.
3.Application to Administrative Appeals Tribunal remitted to the Tribunal for further consideration according to law.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 95 OF 2000
BETWEEN:
GRANT ANDREW KIRKBRIGHT
APPLICANTAND:
SECRETARY, DEPARTMENT OF FAMILY
AND COMMUNITY SERVICES
RESPONDENT
JUDGE:
MANSFIELD J
DATE:
21 DECEMBER 2000
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
This is an application to review a decision of the Administrative Appeals Tribunal (“the Tribunal”) given on 22 March 2000. The Tribunal affirmed a decision of a delegate of the respondent, and subsequently of an authorised review officer, to raise and recover an amount of sole parent pension (“the pension”) from the applicant following the imposition of a lump sum preclusion period under the Social Security Act 1991 (Cth) (“the Act”). The applicant received the pension between 28 January 1993 and 4 September 1997. That pension was paid on a fortnightly basis, increasing in amount simply with adjustments to the rate from time to time. When it first commenced, he received that pension at the rate of $317 per fortnight. Between 27 July 1993 and 9 January 1997 (a period of 181 weeks) he received $30,327 by way of that pension. It is that amount in respect of which the refund is claimed against him.
On 27 July 1993, the applicant suffered injuries in a motor vehicle accident. He subsequently pursued a claim for damages in respect of the injuries sustained in that accident. On 4 February 1999 judgment was given in that claim for $121,463, plus interest and costs. Of that judgment, $70,000 was awarded for past loss of earning capacity, and $5,000 for future loss of earning capacity. The learned trial judge, in his reasons for decision, explained the basis for the quantification of that claimed loss of earning capacity in the following terms:
“The major impact of the plaintiff’s physical and psychological injuries upon his earning capacity occurred, as I find, over a period of about five years from the date of the accident. However, as his history shows, he did not always choose to work, and when he wanted to work he was not always able to do so. On the other hand, he was hoping to obtain full time work with Ausco at the time of the accident, and was offered casual work by the company in September 1993. Had he been able to accept the offer, he would have worked at least until December 1993. Then, according to the correspondence in exhibit P18, he probably would have worked until the end of January 1994 and from April 1994 to March 1995. The evidence of Ausco’s then personnel officer was that the plaintiff was a very capable worker. For the 8 month period that he worked for Ausco before the accident, he earned net wages of approximately $15,000. Doing the best I can to weight favourable and unfavourable contingencies, and given that a broad axe approach is called for, I consider that the sum of $70,000 should represent a fair assessment of the plaintiff’s loss of earning capacity to the time of trial. I allow the nominal sum of $5,000 for the future.”
The amount allowed for loss of earning capacity in the past averages about $14,000 per year for each of the years from July 1993 to the date of judgment, although of course the learned trial judge assessing the damages did not expressly proceed upon that basis and may have allowed in a rough way different amounts for various periods during that 5-5½ year period. The parties, however, were content to treat in the award of damages for past loss of earning capacity in a very rough way as indicating an allowance of about $14,000 per year over that period.
Section 1165(1A) of the Act provides:
“If
(a)a person receives or claims a compensation affected payment; and
(b)the person is not a member of a couple; and
(c)the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period.”
There was initially some issue before the Tribunal as to whether that particular provision was applicable, but that matter has not been ventilated on this application and in my view the Tribunal was clearly correct in determining that it did apply in the particular circumstances. Section 1165(8) provides:
“If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
compensation part of lump sum
income cut-out amount.”
The “income cut-out amount” is defined in s 17(1) of the Act, and at the time of the judgment on the claim for damages it was calculated at $412.70. There is no issue as to the accuracy of the quantification of that item. Section 17(3) of the Act provides:
“For the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a)50% of the payment if the following circumstances apply:
(i)the payment is made (either with or without admission of liability) in settlement of the claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(ab) 50% of the payment if the following circumstances apply:
(i)the payment represents that part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise, on or after 9 February 1998; or
(b)if those circumstances do not apply -so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn.”
The Tribunal, correctly in my view, concluded that s 17(3)(b) applied to the applicant in determining the compensation part of a lump sum for the purposes of determining the new lump sum preclusion period under s 1165(8) of the of the Act. The Secretary determined that that figure, that is the figure which represented or was in respect of lost earnings or lost capacity to earn under the judgment, was $75,000. That is, the sum of the amount allowed for past and future loss of earning capacity. The Tribunal reached the same view. There is no attack upon that determination.
Consequently, using the formula set out in s 1165(8) the lump sum preclusion period was calculated to be 181 weeks and ran from the date of the motor vehicle accident on 27 July 1993 until 13 January 1997. It is by that process that the figure in respect of which recovery is sought was determined. Section 1165(7) relevantly provides that the new lump sum preclusion period is the period that begins on the day on which the loss of earnings or loss of earning capacity began, and ends after the number of weeks worked out as the new lump sum preclusion period under subs (8).
The issue on this application does not concern that process. As part of its decision making process, the delegate of the respondent and on review the Tribunal, had to determine whether any part of the compensation payment otherwise recoverable should be not recovered. Section 1184(1) provides:
“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 appropriate to do so in the special circumstances of the case.”
The applicant contended before the Tribunal that it should find special circumstances within the meaning of s 1184(1) on the basis of his continuing ill-health, his continuing incapacity to engage in future circumstances, his straightened financial circumstances, and the lack of any causal relationship between the injury and the entitlement to the pension. He also submitted that the amount allowed for loss of earning capacity in the past, when calculated on a weekly basis, was not such as to preclude him from being entitled to the pension during the preclusion period so that it could not be said that he was “double dipping”. He claimed that the strict application of the legislation would put him in a worse position than if he had actually earned money during the relevant period rather than received it by way of damages for loss of earning capacity, and that that would be “unjust, unfair and unreasonable”.
Correctly, in my view, the Tribunal categorised those grounds as being based upon ill-health, financial circumstances, and the unfairness of the strict application of the Act. On this appeal, the applicant contended that the Tribunal had erred in law in its consideration of each of those matters. The Tribunal considered each of them individually and collectively. It accepted that the applicant continues to suffer from the effects of the injuries he sustained, and that this hampers his future employment prospects. It accepted that ill-health, either alone or in conjunction with other factors, may give rise to special circumstances. However, in the particular circumstances of this matter, it did not regard the applicant’s ill-health as sufficient to take him “outside that normal range or hardship one sees in other pension recipients”, and because on the balance of the evidence it found that he would be able to return to some form of normal life and to undertake some form of employment in the future, it did not regard that aspect as giving rise to special circumstances.
In relation to the applicant’s financial circumstances, after referring to the nature of his financial position and expenditure, the Tribunal concluded that the applicant is not in any “position different to [sic] many other families, who struggle to meet the demands of child and house related expenses”. It did not think that the financial circumstances were “exceptional” so as to warrant the description special. The applicant was critical of that conclusion also. I do not think that the use of the word exceptional in that context indicates any misapprehension by the Tribunal of the appropriate test to be applied in determining whether special circumstances exist. It had earlier in its reasons identified from Groth v Secretary, Department of Social Security (1995) 40 ALD 541 (“Groth”), the observations of Kiefel J at 545 to the following effect:
“… it would require something to distinguish Mr Groth’s 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. …”
The Tribunal explained in its reasons that
“… when considering special circumstances, one also looks to whether the case is “out of the ordinary” (ie exceptional) and whether something unjust, unintended or unfair has occurred.”
Given the explanation of the Tribunal earlier in its reasons as to how it understood the authority in Groth and other cases (see eg. Re Beadle and Director General of Social Security (1984) 6 ALD 1 at 4 (“Beadle”) and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1 (“Ellis”)), in my judgment it has not overstated the measure against which it should determine whether special circumstances exist.
It is upon the Tribunal’s consideration of the third matter complained of by the applicant, namely the unfairness of the strict application of the Act, that the principal submissions were directed.
The Tribunal accepted that the strict application of the Act is unfair to the applicant, given that the deemed income as determined by the District Court would not in fact preclude him from all benefits during the relevant period. It also found that there was no causal relationship between the injury giving rise to the entitlement to damages, and the circumstances giving rise to the entitlement to the pension, as the applicant was in receipt of the pension prior to the accident, and “the deemed rate of income implicitly set by the District Court would not have precluded him from some eligibility for SPP benefits.”
It also accepted that the lack of the causal relationship between the injury and the benefit entitlement is a matter relevant to be taken into consideration when determining where the special circumstances exist: see Ellis.
However, that unfairness did not lead to the outcome which the applicant sought. That is because the Tribunal thought that the legislation intended compensation payments to be treated differently to any other source of income. After referring to the Explanatory Memorandum to the Social Security Legislation Amendment (Budget and Other Measures) Bill 1996, Pt II of Sch 15, which deals with the alterations to s 1165 so as to introduce subs (1A) and the concept of the new lump sum preclusion period, the Tribunal said that the legislation intends that a compensation recipient exhausts available funds before claiming social security benefits.
In my judgment, the Tribunal was in error in interpreting the legislative intent in that way. In the Second Reading Speech referred to, the following is included:
“The rationale for the provision is that a person who receives a lump sum compensation payment that contains an amount for economic loss, should use part of the payment to provide for himself or herself for a period before turning to the Australian taxpayer, through the social security system for additional support.”
In Haidar v Department of Social Security (1998) 157 ALR 359 at 367, Hill J pithily put the policy in the following terms:
“Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments.”
In doing so, his Honour also had regard to the decision of von Doussa J where the same policy was discerned in the legislation in Department of Social Security v Smith (1991) 30 FCR 56 at 62 (“Smith”) and to the Second Reading Speech to the Social Security Amendment Act 1988 (Cth) making amendments to the now repealed Social Security Act 1947 (Cth) when the concepts now addressed by s 1165 were introduced which relevantly reads:
“This Bill contains measures to improve the administration and integrity of compensation recovery provisions. Where a person receives personal injury compensation that makes up for lost income the Social Security Act provides that pension or benefit may be reduced or recovered. This is one way in which social security expenditures are directed to those most in need.
Settlements of lump sum compensation particularly in the workers compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of social security payments. To prevent this abuse the minister announced on 8 February 1988 that, for future personal injury settlements made by agreement or by consent order, 50% of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect to that proposal.”
In my view, that misapprehension of the legislative policy has influenced the Tribunal into excluding from consideration unfairness in the strict application of the legislation as possibly demonstrating that special circumstances exist in the applicant’s case. Indeed, in my view, s 1184 is designed specifically to enable the respondent, and on review the Tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act. That view was effectively expressed by von Doussa J in Smith at 61:
“The arbitrary nature of the provisions of s 152 would have been quite apparent to the legislature. The “50 per cent rule” in s 152(2)(c)(i), and the other provisions to which I have referred, are intended to operate together as a 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. As I observed in Banks (at 424) it is in the very nature of an arbitrary provision that it can entail a degree of unfairness in a particular case. The scheme of Pt XVII recognises that perfect matching of eligibilities by dollar amounts or by periods of time for pension and for payments by way of compensation in respect of an incapacity for work is impracticable. At the same time the legislature must have recognised that from time to time a case may arise where the degree of unfairness to a recipient of a payment by way of compensation would bring about an unreasonable or unjust result which was outside that which could be justified by the practical expediency of the arbitrary nature of the provisions in ss 152 and 153. Section 156 was enacted as part of the scheme under Pt XVII before the “50 per cent rule” was introduced by the Social Security Amendment Act 1988 (Cth), but this is no reason to construe s 156 as having no operation in respect of a case where the “50 per cent rule” produces a clearly unjust result. Before the 1988 amendment there were other provisions in Pt XVII, the strict application of which could operate in an arbitrary way. By its terms the discretion given by s 156 may be exercised where the Secretary (or a body standing in the place of the Secretary on appeal) “considers it appropriate to do so in the special circumstances of the case”. These are wide words intended, as the Tribunal in Ivovic pointed out, “to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case”.”
I note that his Honour’s reference to ss 152 and 156 in the Social Security Act 1947 (Cth) can now be taken as applying to s 1165 and s 1184 of the Act respectively.
The Tribunal however said:
“The legislation intends that a compensation recipient exhaust available funds before claiming social security benefits. A period is therefore calculated using a deemed income figure equivalent to an amount of income at which a person would be rendered ineligible for benefit. No account is given as to whether or not this accords with the rate at which they have been deemed to have accrued income in a compensation payment. The legislation also gives no account to whether or not that compensation payment deemed rate would have rendered the person eligible for benefit.”
A little later in its reasons the Tribunal said:
“There is clear legislative intent to treat compensation payments as an entirely separate and distinct “income” entity when considering income under the Act. This Tribunal considers that such application can often lead to unfair results (as in the present case) but it cannot ignore this legislative intent.
Whilst this unfairness is an aspect that can be considered by the Tribunal as one of the relevant circumstances, of itself, it does not give rise to “special circumstances”, for it is in no way unique to this applicant. All compensation recipients whose compensation payment deems income at a rate low enough that some independently arising benefit would still have been payable will be unjustly penalised. The unfairness alone, is not special, as it is not of itself, uncommon or exceptional.”
Counsel for the respondent contended that that passage indicated that the Tribunal had not applied a blanket rule that unfairness of the type that it had identified could never constitute special circumstances, and that in reality the Tribunal’s approach was to look at the particular circumstances of the applicant. I do not construe that passage in that way. Had the Tribunal approached the matter in that way, I think it would have been apparent that the Tribunal accepted that, in certain circumstances, the fact that compensation recipients whose compensation payment “deems” income at a rate low enough that some independently arising benefit would still have been payable may nevertheless quality for consideration by virtue of s 1184. It did not say that. Moreover, if that had been the approach of the Tribunal, one would expect the Tribunal to have expressly referred to the amount of the claimed refund, the amount of the implicit weekly earnings or income contained in the award for damages, and to have determined the extent to which the independently arising benefit by way of pension under the Act would still have been payable in the face of that deemed income or implicit income and other considerations. In other words, it would have looked at the extent to which there may have been an injustice or unfairness to the applicant in the particular circumstances. It did not do any of those things. It is clear, in my view, that the Tribunal instructed itself, as a matter of law, that unfairness by virtue of the operation of s 1165(1A) and the other provisions to which I have referred cannot constitute special circumstances.
In my judgment it was an error in so doing. In Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64, Merkel J said at 71:
“In Smith, to which I will later return, von Doussa J rejected a contention put on behalf of the Secretary that “the circumstances of the case” should be confined to matters which are external to the operation of the statutory scheme. His Honour made the point, with which I respectfully agree, that a distinction cannot meaningfully be drawn between matters external to the operation of the scheme and matters which are the product of the strict application of the scheme.”
His Honour expressly referred with approval to observations of von Doussa J in Smith to which I have already referred. I respectfully agree with and adopt their Honours reasons for that conclusion. I think they are also consistent with the observations of Carr J in Ellis and of Kiefel J in Groth.
In my judgment the Tribunal has erred in approaching the matter in the way in which it did. It has failed to recognise that s 1184 may provide a release valve for such unfairness or injustice in certain circumstances.
The consequence is that the Tribunal has deprived the applicant of the opportunity of the Tribunal considering whether, in the light of the injustice and unfairness which the Tribunal clearly found to exist by the strict application of the Act, it would determine in accordance with s 1184(1) of the Act that that gives rise to special circumstances so as to make some decision under that provision. That it may have done so is apparent from the concluding paragraph of its reasons in the following terms:
“Whilst the Tribunal sympathises with the unfair way in which the application of the legislation has impacted upon the applicant, it cannot find any other circumstances which would take this case outside the norm. In the absence of other circumstances which could be described as special, the Tribunal would be ruling contrary to the legislative intent to find this case to be exceptional on the basis of this unfairness alone. Whilst it is unjust, it is unfortunately not uncommon, and the Tribunal can only urge legislative reform to address the inequity in the application of preclusion periods where eligibility or benefit arises independently too (sic) entitlement to compensation.”
It is in those circumstances unnecessary to consider the further matters argued by the applicant on this appeal. I note that the Tribunal also accepted that it was relevant to the exercise of its discretion under s 1184 that the factor giving rise to the entitlement to the pension was unrelated to the circumstances of the applicant’s injury giving rise to his entitlement to damages for personal injuries including his claim for loss of earning capacity. I note also that, by the operation of s 17(3) of the Act, the determination of the amount awarded for loss of earning capacity (then becoming part of the calculation of the new lump sum preclusion period) included compensation received for loss of earning capacity in the future, clearly outside the period during which the applicant was entitled to the pension. The amount received for loss of earning capacity in the past also, on the reasons for decision to which I have referred, extended for a period in excess of twelve months beyond the period to which the applicant was entitled to the pension. Nevertheless that full amount was part of the calculation of the new lump sum exclusion period. Whether that matter is a factor relevant to the Tribunal in reconsidering the applicant’s claim under s 1184(1) of the Act is a matter for the Tribunal. I also do not intend to indicate what decision the Tribunal ought to come to upon its reconsideration. It is a case where the Tribunal has simply directed itself that it is obliged to put out of mind a factor which I regard as relevant. Whether, when it comes to consider the particular circumstances of the applicant and the nature and extent of the injustice or unfairness to which it has referred in its own reasons, there does exist special circumstances is a matter for the Tribunal.
Finally, I mention an argument which was advanced on behalf of the respondent through its counsel namely that the unfairness or injustice by the strict application of the Act cannot qualify as a special circumstance, unless in some way the unfairness or injustice itself arises out of some other special circumstance. In my view, that submission is not supported by authorities. It is a somewhat circuitous proposition. It fails to have regard to the role of s 1184 in the Act and to its plain words. It is but another way of putting the proposition that injustice or unfairness by the strict application of the Act can not of itself amount to a special circumstance for the purposes of s 1184. That is a proposition which, as I have noted, has been rejected by a number of decisions of the Court as far back as Smith and Beadle. It has also been rejected more recently by R D Nicholson J in Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090.
Accordingly, in my judgment this application should succeed. I set aside the Tribunal’s decision made on 22 March 2000 and remit the matter to the Tribunal for further consideration according to law.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate:
Dated: 21 December 2000
Counsel for the Applicant: The applicant appeared in person Counsel for the Respondent: Mr M J Roder Solicitors for the Respondent: Australian Government Solicitor Date of Hearing: 6 December 2000 Date of Judgment: 21 December 2000
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