Krebs; Secretary, Department of Social Services and (Social services second review)

[2015] AATA 963

Krebs; Secretary, Department of Social Services and (Social services second review) [2015] AATA 963 (14 December 2015)

Division	GENERAL DIVISION
File Number	2015/1578
Re	Secretary, Department of Social Services
APPLICANT
And	Kaye Krebs
RESPONDENT

DECISION

Tribunal	Ms G Ettinger, Senior Member
Date	14 December 2015
Place	Sydney

The Tribunal sets aside the decision under review of the former Social Security Appeals Tribunal dated 25 February 2015, and in substitution decides that the Charge of $16,711.77 arising as a result of the compensation preclusion period applied to Mrs Kaye Krebs by Centrelink was correctly imposed. The Tribunal does not find special circumstances to treat any of the compensation Mrs Krebs received as not having been made under section 1184K of the Social Security Act 1991.

.................................[sgd].......................................

Ms G Ettinger, Senior Member

CATCHWORDS

Compensation – Department appeal from the SSAT - lump sum payment received after age pension had been paid – preclusion period applied – charge raised – whether special circumstances – whether unfairness a special circumstance – no special circumstances – decision under review set aside.

LEGISLATION

Social Security Act 1991 ss 1169, 1170, 1171, 1184K

Workers Compensation Act 1987 s 151IA

CASES

Re Beadle and Director-General of Social Security [1984] AATA 176

Re Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487
Clark v Secretary, Department of Employment and Workplace Relations (2007) 96 ALD 129; [2007] FCA 1076
Groth and Secretary, Department of Social Security [1995] AATA 62
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Re Secretary Department of Social Security and Smith (1991) 22 ALD 667; [1991] AATA 382

Secretary, Department of Social Security v Smith (1991) 23 ALD 277; [1991] FCA 280

SECONDARY MATERIALS

Guide to Social Security Law

REASONS FOR DECISION

Ms G Ettinger, Senior Member

14 December 2015

SUMMARY

1. Mrs Kaye Krebs suffered a work related injury to her right shoulder on 26 June 2003. She was compensated through action taken on her behalf at the Workers Compensation Commission NSW (the Commission). That compensation for past economic loss, (in part at least), was recovered in three tranches, $11,750 in 2009, $11,250 in 2013, and $85,000, by consent, in 2014.

2. Due to the operation of section 1171(1) of the Social Security Act 1991 (the Act), these three payments are treated as one single lump sum payment of $108,000. Pursuant to section 17(3) of the Act, 50% of the total amount was determined to be the compensation part of a lump sum compensation payment, that is, $54,000.

3. Mrs Krebs became eligible for age pension in 2011, and began receiving it a year later. There is no argument that age pension is a ‘compensation affected payment’, (section 1169 of the Act), so a preclusion period under section 1170 of the Act was calculated, and imposed. The dates of the preclusion period were 7 March 2012 to 16 April 2013, and a charge of $16,711.77 (the Charge)was to be recovered from Mrs Krebs’ compensation payment.

4. Mrs Krebs sought internal review of Centrelink’s decision to impose a preclusion period. On 16 October 2014 an Authorised Review Officer (ARO) affirmed the decision under review. Mrs Krebs applied for further review to the Social Security Appeals Tribunal (the SSAT) which found for her, and on 25 February 2015, set aside the ARO’s decision, deciding that the compensation payments received by Mrs Krebs should be treated as not having been made due to the special circumstances of the case. The SSAT decided accordingly that no lump sum preclusion period should be applied, and the Charge refunded to Mrs Krebs.

5. On 2 April 2015 the Secretary applied to this Tribunal for review of the SSAT’s decision.

6. Mr Steven Davidson, a solicitor, appeared for the Secretary, the Applicant in these proceedings, and Mr Greg Beauchamp of counsel for Mrs Krebs.

7. I am satisfied from the evidence, and find that there are no special circumstances in Mrs Krebs’ case. I accordingly do not exercise the discretion to treat all or part of the compensation payment as not having been made. My reasons follow.

   RELEVANT LEGISLATION

8. As already stated, the legislation relevant to this decision is contained within the Social Security Act1991.

9. Policy guidance set out in the ‘Guide to Social Security Law’, (the Guide),is also relevant.

10. Section 1170 of the Act provides that if a person receives a lump sum compensation payment, they are subject to a compensation preclusion period calculated according to a formula stipulated under the Act. Section 1169 of the Act provides that a person is not eligible to receive a ‘compensation affected payment’ while a lump sum preclusion period is in place. Mrs Krebs has been eligible for age pension since 2011, and has been the recipient of an age pension since 2012. Age pension is, pursuant to the legislation, a ‘compensation affected payment’.

11. The reason behind the compensation preclusion period provisions has been recognised to ensure that a person is not paid from two sources in respect of the same period of time. (Groth and Secretary, Department of Social Security [1995] AATA 62, [41]). The expectation is that when a person receives compensation, they should use that money to support themselves.

12. Section 1184K of the Act deals with the situation of special circumstances which may apply so that the Tribunal can exercise the discretion that all or part of the compensation payments received by the Mrs Krebs should be treated as not having been made.

    ISSUES BEFORE THE TRIBUNAL

13. The issues in this matter are:

    ·whether Mrs Krebs is subject to a compensation preclusion period from 7 March 2012 to 16 April 2013; and if so,

    ·whether there is any basis to treat the whole, or part of the compensation payment as not having been made, due to the special circumstances of Mrs Krebs’ case.

14. The parties agreed that the preclusion period had been correctly calculated pursuant to sections 1170(1), (4), (5), and 1171(1) of the Act following the aggregation of the three compensation payments Mrs Krebs received. It is Mrs Krebs’ argument that the imposition of the full preclusion period calculated is unfair, and that the circumstances warrant the exercise of the special circumstances discretion under section 1184K of the Act.

    CONSIDERATION OF THE EVIDENCE AND THE LAW

    Evidence of Mrs Krebs

15. Mrs Krebs gave evidence at the Tribunal, and told me about the work related right shoulder injury she suffered in 2003, and the ill health and pain she now suffers. She takes prescription medication including Lyrica, Panadeine Forte, and Oxycontin, which is expensive. Mrs Krebs says that she has to maintain private health insurance which costs $360 per month because of her many medical expenses.

16. Exhibit R1 comprised of a number of documents concerning Mrs Krebs’ injury, mainly in regard to proceedings at the Commission. There were also medical reports, of Dr Mario Benanzio, an orthopaedic surgeon, dating back to 2004, a Certificate of Permanent Impairment of the Commission dated 5 May 2005 awarding 8% Total Whole Person Impairment (WPI), and a report of Dr W Patrick, a general and vascular surgeon dated 10 December 2012. Dr Patrick calculated 16% WPI.

17. Mrs Krebs told me that her husband who is 70 years old, is now her carer. Mrs Krebs also indicated that as a manager, she would have worked to the age of 65, or even older if she had not been injured. She says that due to her injury she cannot do the housework, and has to pay her housekeeper $30 an hour to do it for her.

18. Mrs Krebs also gave evidence about the couple’s joint household assets and expenses. The house valued at $320,000, is owned jointly, as well as a caravan worth $35,000, a motor vehicle worth $12,000, and a superannuation account in Mr Krebs’ name worth $16,000.

    The compensation preclusion period

19. Mrs Krebs is content with the findings of the former SSAT which reached a conclusion that no preclusion period applied, and that the charge of $16,711.77 which had been recovered would be repaid to her. However, the Secretary has appealed the decision of the former SSAT for review by this Tribunal.

20. I note that neither party challenged the method of calculation or actual figures for the compensation preclusion period, and I accept they are correct.

21. I also note that the principles behind the imposition of a compensation preclusion period have been recognised and applied many times in this Tribunal, and in the Federal Court. Section 1170 of the Act provides that if a person receives a lump sum compensation payment, they are subject to a compensation preclusion period. Section 1169 of the Act provides that a person is not eligible to receive a ‘compensation affected payment’ (such as age pension), while a lump sum preclusion period is in place.

22. The Secretary submitted as follows:

    This preclusion period commenced on the day the Respondent ceased to receive periodic compensation payments, being … 2012 when she turned 65 years of age pursuant to s 1170(1). The preclusion period ended 58 weeks after this date on 16 April 2013.

    …

    Subsection 1184(1) allows the Secretary to issue a notice to a compensation payer to recover an amount specified in the notice. That amount is calculated in accordance with s 1184A(1), relevantly in this case, by reference to the sum of the compensation affected payments made during the lump sum preclusion period.

    Upon receipt of the notice, the compensation payer is liable to pay the Commonwealth the amount specified in the notice (s 1184(3)).

    …

    The Secretary contends that the preclusion period was calculated correctly and the Charge recovered in accordance with the Act.

    …

23. The preclusion period is in effect to ensure that a person is not paid from two sources in respect of the same period of time. (Groth and Secretary, Department of Social Security [1995] AATA 62 [41]). This reflects, as the Secretary has submitted, and the Respondent has agreed, the notion that when a person receives compensation, they should use that money to support themselves before turning to taxpayer-funded support in the form of a ‘compensation affected payment’ such as age pension. Mrs Krebs commenced receiving age pension following her 65^th birthday in March 2012. The compensation preclusion period later imposed on Mrs Krebs applied retrospectively from 7 March 2012 to 16 April 2013, during which she received age pension, resulting in the charge of $16,711.77.

    The Applicant’s submissions

24. Mr Davidson referred me to a number of cases in support of his argument, particularly addressing the fact Mrs Krebs felt the outcome of the imposition of the preclusion period in her case was unfair. He emphasised that unfairness alone could not amount to a special circumstance (Chamberlain). I have dealt with the most significant cases below. In the Statement of Facts and Contentions of the Applicant, Mr Davidson submitted as follows:

    In Secretary, Department of Social Security v Smith (1991) 23 ALD 277 the Federal Court considered an appeal from a decision of the Administrative Appeals Tribunal in which it was found that special circumstances existed due to an unfair or unjust result produced by the legislation. This unfairness was found on the basis that there was no period in which Mr Smith received “double payments” in respect of both compensation for economic loss and social security payments. Thus, the statutory presumption underpinning the legislative regime was not fulfilled.

    The Secretary appealed to the Federal Court on the basis that the discretion could not be exercised on the basis of an unjust result arising solely as a product of the legislation. Justice Von Doussa rejected this argument, observing that the reference to special circumstances were “wide words intended... to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case”. The Court dismissed the appeal.

25. This was a case where, as can be seen above, the Federal Court dismissed the appeal of the Secretary, and found that there was no period in which Mr Smith received ‘double payments’ in respect of both compensation for economic loss and social security payments. Thus, the statutory presumption underpinning the legislative regime was not fulfilled.

26. I next considered Mr Davidson’s submissions in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67, a case which is of relevance and precedent value here, and was also followed in Clark v Secretary, Department of Employment and Workplace Relations [2007] 96 ALD 129 (Clark). In Clark, Justice Lindgren held that notwithstanding it seemed unfair that Mr Clark should suffer a preclusion period, he did not think that this constituted special circumstances in the light of the legislative intention.

27. Mr Davidson submitted as regards Chamberlain:

    The case of Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 concerned a decision of the Administrative Appeals Tribunal to find that there were special circumstances which justified the disregard of compensation received by Mrs Chamberlain. Mrs Chamberlain suffered a workplace injury when she was 60 years of age. The Tribunal had observed that as a result of applying the statutory formula, Mrs Chamberlain was required to repay to Centrelink more than double the amount she actually received for economic loss, which was limited due to her age. On this basis, the Tribunal exercised its discretion to disregard $28,000 of the $35,000 compensation received by Mrs Chamberlain.

    Before the Federal Court, the Secretary argued that a “decision-maker can never take into account what was actually received by way of compensation for economic loss in considering the circumstances of the particular case”. In response, it was argued that the decisions of Kerkland (57 ALD 600) and Smith ([1991] 23 ALD 277) permitted such an approach.

    In her decision, Kiefel J distinguished the case at hand from that of Kerkland and Smith, observing that the facts of those cases were ‘unusual’ as ‘it could be seen objectively, that there could not have been a double payment. Her Honour went on to observe as follows (emphasis added):

    In the present case the Tribunal considered that the application of the formulae was unfair to the applicant because she would have to pay more than she had received by way of compensation for economic loss, indeed twice as much. That factor will however be present in most cases and is an aspect of the application of the formulae. In my view it cannot, by itself, amount to a special circumstance, one out of the ordinary.

    The basis for the Tribunal's view was its acceptance of what the parties to the settlement said had been offered and accepted for the economic loss component. It was far less than the statute assumed to be the case in applying the formulae. Again, however, this will be so in many, if not most, cases to which the Act applies. Further, the extent of the difference from the basis upon which the parties acted could not provide the necessary ‘special circumstance’. The statute has selected a figure which may operate in an arbitrary way.

    The statutory objectives in utilising the formulae, referred to above, must also be borne in mind. It is not intended that a decision-maker be required to consider contentions about what part of the compensation reflected the economic loss component. That is so whether one has regard to the application of the formulae or the discretion under s 1184. The latter does not alter the objective and must be read in light of it.

    On remittal, the Tribunal declined to exercise the discretion in favour of Mrs Chamberlain. Senior Member McCabe (Re Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487) observed as follows:

    The real lesson from Chamberlain and the other authorities seems to be this: once the Tribunal has satisfied itself the statutory formula was correctly applied, the tribunal is not otherwise interested in the formula and whether or not it reflects the ‘true’ position.

28. Mr Davidson submitted as regards Clark:

    In Clark v Secretary, Department of Employment and Workplace Relations the Federal Court considered the impact of the WC Act in the context of special circumstances for the purposes of s 1184K(1) of the Act.

    In Clark, Mr Clark ceased work on 31 October 2000 due to a work related injury. He commenced receiving periodic payments on 2 November 2001 under the WC Act He became eligible for age pension on 29 April 2004. Similar to this case, section 52 of the WC Act prevented any compensation payments being made to Mr Clark from after 29 April 2005 (a year after reaching pension age).

    Mr Clark commenced an action for damages, which included a claim for economic loss until the age of 65, The claim was settled in March 2005 for $280,000. It was contended relevantly on behalf of Mr Clark that the Tribunal erred by failing to take into account:

    the unfairness occasioned by the limitation placed on the Appellant’s claim for economic loss compensation after the age of 65 coupled with the requirement “periodic compensation payments” calculated up to the age of 66 were deducted from the appellant’s “lump sum compensation”.

    In interpreting the relevant sections of the Act imposing the preclusion period, Lindgren J observed as follows:

    It may well be that in Mr Clark’s case, because of his age, the sum of $280,000 included no component, or only a very small component, for loss of his capacity to earn beyond age 65 (29 April 2004) and the statutory formula produces a result that is unfair to him, but if so, that result flows from a deliberate policy decision of the legislature favouring simplicity and efficiency of administration and reduction in administrative costs over attaining a fair result in each case considered on its individual merits.

    Against this background, his Honour went on to consider whether there were special circumstances in Mr Clark’s case and observed as follows (emphasis added):

    I respectfully agree with the approach that was taken by Kiefel J [in Chamberlain]. The expression "special circumstances" in s 1184K does not embrace the circumstance that the 50 percent rule will yield a preclusion period beginning on a certain date that will or may be excessive, even grossly excessive, having regard to the component included in a lump sum settlement for loss of earnings or of earning capacity, to the age of the injured person, and perhaps to other circumstances.

    Once one embarks on an inquiry of the kind that would be required in such a case, one is defeating the legislative intention. The Parliament must be taken to have contemplated as ‘usual’ or ‘ordinary’ the circumstances of people placed as Mr Clark is. In effect, by adopting the rough and ready 50 percent rule, the legislature has faced such people with a choice: not sue at all and to rely, instead, on such other entitlements as may be available; litigate to trial so that the Court will identify a figure for loss of earnings and of earning capacity; or settle subject to the operation of the 50 percent rule.

    In the present case, Mr Clark must be taken to have decided against the former two courses. I do not know why he did so. In one sense, it seems unfair that Mr Clark should suffer a preclusion period until 15 February 2008, but I do not think that this constitutes "special circumstances" in the light of the legislative intention.

    Mr Clark’s application was dismissed.

    …

    the Secretary contends that the approach in Secretary, Department of Family and Community Services v Chamberlain, [2002] FCA 67, and Clark v Secretary, Department of Employment and Workplace Relations, [2007] 96 ALD 129 mark a shift in approach compared to the cases that preceded it. In these cases the Federal Court recognised that the discretion that exists in s 1184K of the Act must be read in light of the deliberate policy choices that have been made in the enactment of Part 3.14 of the Act. Perceived unfairness of those desired policy outcomes cannot, of itself, be the basis for a finding of ‘special circumstances’.

    Mrs Krebs’ submissions

1. Mr Beauchamp, argued on behalf of Mrs Krebs that whilst she accepted that the preclusion period is in effect to ensure that a person is not paid from two sources in respect of the same period of time, no double dipping ever occurred in her case. Mr Beauchamp argued by that by operation of law, this was prohibited from occurring, pursuant to section 151IA of the Workers Compensation Act1987 (NSW) (WCA) which relevantly provides:

   In awarding damages for future economic loss due to deprivation or impairment of earning capacity or loss of expectation of financial support, the Court is to disregard any earning capacity of the injured worker after pension age (as defined in the Social Security Act 1991).

2. Mr Beauchamp submitted that pursuant to the Act, Mrs Krebs reached pension age upon attaining 64 years of age in 2011, and was by reason of Section 151IA of the WCA therefore prevented from claiming any damages for economic loss beyond in March 2011. As stated above Mrs Krebs did not commence receiving the Age Pension until March 2012. By reason of Section 52 of the WCA, Mrs Krebs continued receiving periodic compensation in respect of her workplace injury for 12 months beyond reaching pension age, namely up to March 2012.

3. In her Statement of Facts and Contentions, the legal representative for Mrs Krebs explained the three payments Mrs Krebs received under the WCA, two being for permanent impairment, and the work injury damages lump sum settlement on 6 May 2014 for $85,000 in respect to damages pursuant to Part 5 of the WCA. He submitted that the damages were in respect of past economic loss due to loss of earnings, past loss of superannuation and Fox v Wood damages only. He explained that the damages for past economic loss due to loss of earnings were solely in respect of the difference between Mrs Krebs’ probable earnings, but for the injury on 24 December 2003, and the lesser periodic compensation paid in respect of that injury up to the date Mrs Krebs reached retirement age. He also submitted that the damages Mrs Krebs received were inclusive of legal costs and disbursements, and that she received $55,000.00 from which the charge amount of $16,711.77 was deducted. He submitted that by operation of Section 151G of the WCA, no damages were awarded in respect of any future medical expenses, future care or non-economic loss damages.

4. I acknowledge Mr Beauchamp’s expertise in these matters and thank him for his submissions. However as I have stated above, none of those are relevant considerations in terms of the calculation of the compensation preclusion period which must be made pursuant to the Social Security Act 1991. Pursuant to the Social Security Act 1991, all the compensation received must be aggregated pursuant to section 1171(1), which came to $108,000 in Mrs Krebs’ case. In calculating the compensation preclusion period pursuant to section 1170 of the Act, the aggregated sums received are effectively halved, without taking into account whether the payments were for future or past loss.

   The application of ‘special circumstances’ pursuant to section 1184K of the Act

5. In coming to a decision regarding the correct or preferable decision, and the consideration of whether to exercise the discretion to treat some or all of the compensation paid to Mrs Krebs as not having been made, I have taken into account the evidence and submissions made, the legislation and case law. I am satisfied that the preclusion period was correctly calculated.

6. I have considered Mrs Krebs’ circumstances in the context of section 1184K of the Act which provides a decision maker, and hence this Tribunal with a discretion to treat the whole or part of the compensation payments as not having been received. The discretion can be exercised if the Tribunal is satisfied that it is justified by the special circumstances of a particular case. Section 1184K(1) states as follows:

   (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.

7. Special circumstances and how the phrase is interpreted has been widely considered by this Tribunal and the Federal Court. An oft quoted authority is Re Beadle and Director-General of Social Security [1984] AATA 176 where  the Tribunal considered the phrase special circumstances as follows:

   An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.

8. In considering whether Mrs Krebs’ circumstances are special circumstances in the terms of section 1184K of the Act, I had to consider whether they are unusual, uncommon or exceptional. I took into account her evidence regarding her financial situation, noting that most people reliant on a pension are not affluent. However I am not satisfied Mrs Krebs is in straitened circumstances. She and her husband who is her carer, own a home, caravan, and car, so that financial hardship which can be classified as unusual, uncommon or exceptional cannot be established on that basis.

9. I acknowledge Mrs Krebs suffers pain as a result of her injury, and has to take medication. I do not have any evidence that her situation has deteriorated, or that her health can amount to a special circumstance.

10. What remains is whether what Mrs Krebs perceives as unfairness in the imposition of the preclusion period can be held to be a special circumstance. Essentially she submits that because the Workers Compensation Act 1987 requires a court in awarding damages for future economic loss to disregard the earning capacity of the injured worker after he or she reaches pension age, there could not have been any component for economic loss negotiated in her settlement for any period after she reached pension age in 2011. Accordingly her settlement was for past economic loss she says, during a period when she was not receiving age pension, and a preclusion period should therefore not apply.

11. I noted that the Secretary relied upon the case law, in particular, Chamberlain and Clark, where Justice Lindgren in essence said that the fact that the outcome regarding the calculation and imposition of preclusion periods may be unfair, that it is not a special circumstance. He emphasised that that was what the legislature intended. I am mindful many cases have followed Clark and Chamberlain. I have also taken into account the relevant clauses of the Guide such as 4.13.2. Whilst the Guide is not law, unless there is any inconsistency with the legislation, its guidance should be taken into account.

12. I accept the Secretary’s submissions, and must apply the judgments in the cases of Clark and Chamberlain. I find that accordingly, notwithstanding there might be unfairness in the imposition of a compensation preclusion period for Mrs Krebs, the correct or preferable decision is to set aside the decision under review of the former SSAT, and in substitution decide that the Charge of $16,711.77 arising as a result of the compensation preclusion period applied to Mrs Krebs by Centrelink was correctly imposed. I am not able to find special circumstances to treat any of the compensation Mrs Krebs received as not having been made under section 1184K of the Social Security Act 1991.

    DECISION

13. The Tribunal sets aside the decision under review of the former Social Security Appeals Tribunal dated 25 February 2015, and in substitution decides that the Charge of $16,711.77 arising as a result of the compensation preclusion period applied to Mrs Kaye Krebs by Centrelink was correctly imposed. The Tribunal does not find special circumstances to treat any of the compensation Mrs Krebs received as not having been made under section 1184K of the Social Security Act 1991.

I certify that the preceding 41 (forty -one) paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member

....................................[sgd]....................................

Associate

Dated 14 December 2015

Date(s) of hearing	19 October 2015
Solicitors for the Applicant	Mr S Davidson, Department of Human Services
Counsel for the Respondent	Mr G Beauchamp
Solicitors for the Respondent	Firths