Lazarov and Secretary, Department of Social Services (Social services second review)
[2022] AATA 3238
•7 October 2022
Lazarov and Secretary, Department of Social Services (Social services second review) [2022] AATA 3238 (7 October 2022)
Division:GENERAL DIVISION
File Number(s): 2021/9783
Re:Blagoj LAZAROV
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
Decision
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:7 October 2022
Place:Sydney
The decision dated 8 December 2021 of the Social Services and Child Support Division of the Tribunal is affirmed.
....................................[SGD]....................................
Emeritus Professor P A Fairall, Senior Member
Catchwords
SOCIAL SECURITY – preclusion period – whether applicant received 'compensation' – whether preclusion period correctly calculated – discretion under s 1184K – whether special circumstances exist – decision affirmed
Legislation
Motor Accident Insurance Act 2017 (NSW)
Social Security Act 1991 (Cth)
Cases
Beadle and Director-General of Social Security (1984) 6 ALD 1
Clarke v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Drachinikov and Centrelink [2003] FCAFC 1333
Groth and Secretary Department of Social Security (1995) FCA 1708
HGMZ v Secretary, Department of Social Services [2021] FCA 280
Kertland v Secretary, Department of Family Services [1999] FCA 1596
Secretary, Department Social Security v a'Beckett (1990) FCA 332; (1990) 12 AAR 212, 222-223
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Secretary to the Department of Family & Community Services and Kelava [2003] AATA 834Vucic and Secretary, Chief Executive, Centrelink 2020/S155801
Secondary Materials
Social Security Guide
REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
7 October 2022
By application dated 14 December 2021, Mr Lazarov (the applicant) seeks merits review of a decision made on 8 December 2021 by the Social Services & Child Support Division of the Tribunal (AAT1). The AAT1 found that a decision by Services Australia (Centrelink) to apply a compensation preclusion period (CPP) to Mr Lazarov’s compensation payments was correct, that it was correctly calculated, and that were no grounds for disregarding the whole or part of the compensation received because of special circumstances. The applicant contends that the decision is wrong in law.
BACKGROUND
On 21 June 2018, the applicant was injured in a motor vehicle accident, and later claimed damages under Part 4 of the Motor Accident Injuries Act 2017 (NSW) (the MAIA) against the statutory insurer, NRMA Insurance (NRMA). He received statutory insurance benefits totalling $45,888.56 from the NRMA in fortnightly payments of $1,260.74.[1] The payments were made under Division 3.3 of the MAIA.
[1] T4.
Under subsection 3.13(1) of the MAIA, he was not entitled to receive NSW statutory benefits for loss of earnings or earning capacity occurring after the first anniversary of the date on which he attained retiring age. Mr Lazarov was born on 21 September 1953. His pension age of 65 years and 6 months was reached on 21 March 2019.[2] Accordingly, his statutory benefits ceased on 20 March 2020. Under subsection 3.13(1), he was not entitled to receive NSW statutory benefits beyond 20 March 2020.
[2] RSFIC, [4]; Transcript, 28 July 2022, 9, 10.
Mr Lazarov received age pension (AP) from 21 March 2020, (the day following the cessation of state-based statutory benefits) and pension payments continued until 2 August 2021, amounting to a total of $25,482.61.[3]
[3] T8, 72.
On 14 May 2021, Centrelink issued a preliminary notice to the NRMA advising that it intended to recover an amount equal to all or part of any amount paid under a contract of insurance.[4]
[4] T13, 124.
On 15 July 2021, Mr Lazarov settled his claim. Under the Settlement Deed (the Deed), a sum of $400,000.00 is to be paid in full and final settlement of all claims for non-economic loss and economic loss against the NRMA.[5] Under clause 2(b)(ii) of the Deed, NRMA was entitled to deduct from this amount the Division 3.3 benefits paid by NRMA to the applicant.[6] The amount of $45,888.56 was therefore withheld by NRMA from the settlement monies.
[5] T5, 50.
[6] Clause 2(b)(i) and (iii) refers to various payments and fees which do not apply in this case.
Under clause 2(a) of the Deed, the NRMA was also entitled to deduct from the settlement amount any amounts repayable to Centrelink for benefits Mr Lazarov had received under the Social Security Act 1991 (Cth) (the Act).
On 19 July 2021, the NRMA’s solicitors (McCabe Curwood) wrote to Centrelink to advise that the claim had been settled.[7] The letter provided details of the claim and settlement and stated: ‘Economic Loss Claimed – Yes’. The letter sought to receive a notice from Centrelink of all monies payable to Centrelink on Mr Lazarov’s behalf as soon as possible. In turn, Centrelink contacted Mr Lazarov to inform him that he was likely to be precluded from receiving age pension and would be obliged to pay back age pension received.
[7] T5, 47.
On 2 August 2021, his solicitor, Mr Koutzoumis, who also represented the applicant in these proceedings, wrote to Centrelink asking it to reconsider the decision to impose a preclusion period. He stated that the settlement monies received by Mr Lazarov could not have included any component for economic loss after he reached pension age on 21 June 2019. ‘Accordingly, Mr Lazarov could not receive a double payment for future damages for any period after’ that date and ‘whatever Mr Lazarov received in his compensation lump sum, it did not represent economic loss after he reached age pension age’ (emphasis in original). Mr Koutzoumis submitted that this was a sufficiently special circumstance to warrant the use of section 1184K of the Act, which allows the Secretary to treat the whole or part of a compensation payment as not having been made if the Secretary thinks it is appropriate to do so in the special circumstances of the case. Mr Koutzoumis referred to Kelava, a decision of the Tribunal, which he claimed to support his request.[8]
[8] Secretary to the Department of Family & Community Services and Kelava [2003] AATA 834 (Kelava).
On 11 August 2021, Centrelink issued a Compensation Recovery Notice to the NRMA, noting that according to its records, the NRMA was liable to pay to Mr Lazarov under a contract of insurance ‘for lost earnings or capacity to earn’. Centrelink proposed to recover $25,482.61 for recoverable Centrelink payments received by Mr Lazarov from 21 March 2020 to 2 August 2021.[9] The Notice indicated that NRMA was liable to pay this amount to Centrelink under section 1184D of the Act.
[9] T13, 147.
On 11 August 2021, Centrelink also wrote to Mr Koutzoumis to request that the amount of $25,482.61 be repaid to Centrelink ‘before making payment to Mr Lazarov’.
Centrelink decided to impose a preclusion period of 169 weeks (running from 20 March 2020 to 15 June 2023), and to recover $25,482.61 from the NRMA for AP paid to Mr Lazarov for the period 21 March 2020 to 2 August 2, the amount being recovered on 30 August 2021.[10]
[10] T8, 72.
On 20 August 2021, Mr Koutzoumis filed an application for formal review, attaching his letter of 2 August, which he noted, remained unanswered.[11] The application sought review of the decision to recover $25,482.61, as well as the decision to impose the preclusion period.
[11] T7, 58.
On 30 September 2021, an Authorised Review Officer (ARO) affirmed both the recovery amount and the preclusion period.[12]
[12] T8, 72, 77.
On 8 December 2021, the Social Services & Child Support Division of the Tribunal (AAT1) affirmed the decision by the ARO. The AAT1 found that Mr Lazarov was subject to a CPP, that it was correctly applied, and that there were no special circumstances such that the whole or part of the compensation received should be disregarded in calculating the preclusion period.[13]
[13] It necessarily followed that the decision to recover age pension paid during the preclusion period should be recovered, although the AAT1 did not specifically refer to this.
THE HEARING
The application was heard by the Tribunal on 28 July 2022. The applicant was represented by Mr Koutzoumis, who also represented him before the AAT1. In response to questions from the Tribunal, the parties confirmed that there were no factual disputes for resolution, although Mr Koutzoumis provided some updated information about the balance of his client’s savings account. In short, the savings account had a lower balance than the information originally provided to the Tribunal. His current balance was $268.04.[14]
[14] Transcript, 28 July 2022, 7.
LEGISLATION
Section 17(2) of the Act provides:
(2) Subject to subsection (2B), for the purposes of this Act, compensation means:
(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.(emphasis added)
Section 17(3) of the Act provides:
(3) Subject to subsection (4), 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 a 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; 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; 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, or both (emphasis added).
Section 1184K of the Act provides:
(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.
Section 3.13 of the MAIA provides:
Termination of weekly payments on retiring age
3.13 Termination of weekly payments on retiring age
(1) If the motor accident that causes a person's injury happens before the person reaches the retiring age, a weekly payment of statutory benefits is not to be made under this Division in respect of any resulting period of loss of earnings or earning capacity occurring after the first anniversary of the date on which the person reaches the retiring age.
(2) …
(3) In this section--
"retiring age" means the age at which a person would, subject to satisfying any other qualifying requirements, be eligible to receive an age pension under the Social Security Act 1991 of the Commonwealth.
ISSUES
The issues for determination by the Tribunal (AAT2) are:
a. Whether the applicant is subject to a CPP as a result of him receiving a lump sum settlement under a contract of insurance and, if so, whether the period has been calculated correctly by Services Australia;
b. Whether there are grounds to treat all or part of the payment as not having been made because it is appropriate to do so in the special circumstances of the case.
Is the applicant subject to a CPP?
Part 3.14 of the Act states that a person who receives a lump sum compensation payment for personal injury will be subject to a preclusion period if the settlement amount includes a component in respect of economic loss. As set out in the Social Security Guide (the Guide), the rationale for these provisions is to:
...reflect the principle that if a person has been compensated for loss of income, they should use that money to live off rather than receive a taxpayer-funded payment. Lump sum compensation payments are treated on the basis that people who cannot work because of a compensable injury should NOT receive income support for the same period from both the [social security system and compensation systems].
Section 1169 of the Act provides that if a person receives or claims a compensation affected payment, and the person receives a lump sum compensation payment, the compensation affected payment is not payable to the person in relation to any day or days in the lump sum CPP.[15]
[15] T3, 20. Subsection 17(1) of the Act provides various definitions relating to ‘compensation recovery’, including the definition of a ‘compensation affected payment.’ The age pension is subject to the CPP by reason of the definitions in paragraphs 17(1)(a) and (c), and subsection 23(1) of the Act.
The number of weeks in the CPP is determined by the formula set out in subsection 1170(4).[16]
[16] T3, 21.
(4)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
(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.
The expressions ‘income cut out amount’ and ‘lump sum compensation payment’ are defined in section 17 of the Act.[17]
[17] T3, 16.
Subsection 17(3)(a)(i) provides that where a payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition, and the claim was settled either by consent, judgment being entered into in respect of the settlement, or otherwise, then the compensation part of a lump sum compensation payment is 50 percent of the payment.
CONSIDERATION
The Applicant’s Contention
Under subsection 17(2) of the Act, ‘compensation’ is defined to include a payment in settlement of a claim for damages, or a claim under an insurance scheme, that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. Mr Koutzoumis contended that the underlying principle of the legislation is that a person should not receive compensation for economic loss as well as a social security payment for the same period. He said that such duplication did not happen, and could not have happened, because, under the MAIA, Mr Lazarov was not legally entitled to receive any statutory benefit from the NRMA after he reached the anniversary of his retiring age. He inferred from this that the lump sum settlement could not have included any component for economic loss after that point in time.
At the hearing Mr Koutzoumis argued that the lump sum settlement amount did not, as a matter of fact, include any component for economic loss and therefore that there was no lawful basis for applying any preclusion period.
MR KOUTZOUMIS: We will contend that the settlement did not include an amount for economic loss, notwithstanding the deed of settlement suggested as such. Because in these matters, a proforma deed of settlement is always prepared by an insurer as a catchall, past, present, future, don’t ever come back, here’s your 400 grand, leave us alone.[18]
[18] Transcript, 28 July 2022, 11.
This precipitated a response from Mr Hillyard, for the Respondent, that this put the case quite differently from the pre-hearing submissions, which were based on section 1184K (special circumstances).
MR HILLYARD: [A]s I understand Mr Koutzoumis’ submission advanced this morning...he seems to be saying that there can’t be any compensation preclusion period at all because no compensation within the meaning of section 17(2) has been paid to Mr Lazarov, so that we don’t even get to the next stage of how the compensation preclusion period is calculated and what component is taken to be economic loss.[19]
[19] Transcript, 28 July 2022, 13.
It may be helpful to see Mr Koutzoumis’s overall argument as involving alternative strands. According to the first strand, Mr Laravov did not receive ‘compensation’ as defined in the Act and was therefore not subject to any CPP. In the alternative, if the settlement was compensation, the effect of treating half the amount received for economic loss created such unfairness that it was appropriate to treat some or all of the compensation payment as not having been made, as provided for by section 1184K of the Act.
The first strand involved two alternative arguments. First, the settlement did not, as a matter of fact, include any component for economic loss, and therefore was not a compensation payment. Second, and by way of reinforcement, no such component could have been included, given the cessation of statutory benefits required by subsection 13(3) of the MAIA.
The second strand also involved two alternative arguments. First, the effect of applying the 50% rule was intrinsically unfair in that it generated a disproportionately long CPP; and second, the imposition of the rule was unfair when considered in the context of a person at or close to retirement. On either footing, the case involved special circumstances so as invoke a discretion under section 1184K to treat all or some of the compensation payment as not having been made.
At various points during the hearing these different contentions flowed together, and it may be that some overlap occurs in the following analysis.
Did Mr Lazorov receive a compensation payment?
Mr Koutzoumis argued that in negotiating a settlement for the accident which occurred on 21 June 2018, the parties would have been aware that statutory benefits were not payable beyond 20 March 2020, the first anniversary of his retirement age. Because Mr Lazarov was not entitled to receive statutory benefits, having already reached the anniversary of his retiring age when the settlement was agreed to, the compensation amount agreed to in July 2021 could not have included any component for economic loss. In short, the settlement amount could not, as a matter of law, have included any economic loss component.
This is a tenuous argument, which treats section 17 of the Act as subordinate to and subject to section 13.3 of the state legislation. But leaving this aside, the fact that Mr Lazarov was not entitled to state-based benefits beyond a certain date does not imply that a settlement entered into after that date[20] could not include a component for economic loss. This might follow if there was an inflexible rule that a person could not work beyond the anniversary of their retirement date.
[20] Payments of statutory benefits ceased on 20 March 2020, and the claim was settled on 15 July 2021. In the interim, Mr Lazarov received AP.
I note that the Deed refers explicitly to settlement of all ‘claims for non-economic loss and economic loss against the NRMA’.[21] Mr Koutzoumis contends that this is merely a pro forma and does not imply that the settlement sum was made wholly or partly in respect of lost earnings or lost capacity to earn. Even so, the letter dated 19 July 2021 from NRMA’s solicitors McCabe Curwood to Centrelink explicitly states: ‘Economic Loss Claimed – Yes’.[22] Admittedly, the fact that something is claimed says nothing about the precise manner in which the settlement sum in respect of that claim was arrived at.
[21] T5, 50.
[22] T5, 47.
Mr Koutzoumis has provided no evidence, for example, by way of affidavits from those involved in the settlement discussions, as to how the compensation payment was arrived at. No evidence was provided in these proceedings regarding Mr Lazarov’s pre-accident retirement intentions. In essence, Mr Koutzoumis asks the Tribunal to make a factual finding as to the composition of the settlement sum based solely on the rule under subsection 13(3) that statutory benefits cease at a certain point after reaching retirement age.
I emphasise the point that while the entitlement to receive statutory benefits ceases upon the anniversary of reaching retirement age, a claimant is under no obligation to retire, and indeed, the Commonwealth has at various times encouraged persons to work well beyond their retirement age. A person who, prior to the accident, had every intention of working long after reaching their retirement age and was no longer able to exercise that option would be powerfully disposed to ensure that any lump sum provided a component for lost earnings or lost capacity to earn.[23]
[23] According to statistics released by the Australian Bureau of Statistics, in 2018-19 half of all citizens intend to retire at 65.5 years of age, implying that a significant number work past that age: see Retirement and Retirement Intentions Australia, >
With respect, I think this provides an answer to the submission that the settlement did not include and could not have included a component for lost earnings or lost capacity to earn resulting from personal injury based on section 13.3 alone. I therefore do not accept either basis for the first strand of the argument put by Mr Koutzoumis.
I am satisfied that Mr Lazarov received ‘compensation’ as defined by subsection 17(2) and was subject to a CPP, and that it was correctly applied by Centrelink, as found by AAT1.
Are there are special circumstances such that the whole or part of the compensation payment should be treated under section 1184K as not having been made?
Mr Koutzoumis did not base any claim for special circumstances on factors personal to Mr Lazarov, but rather in the supposed unfairness in the operation of subsection 17(3) of the Act. The statutory formula resulted in $177,055.67 being allocated for economic loss, with a commensurately long CPP. When account was taken of Mr Lazarov’s age, and the fact that he had passed retirement age at the time of settlement, this was a very large amount.
In essence, I understood Mr Koutzoumis’s argument to be that the effect of applying the 50% rule was intrinsically unfair in that it generated a disproportionately long CPP; and especially unfair when considered in the context of a person at or close to retirement. The intrinsic unfairness was a special circumstance, and it was therefore appropriate to treat the whole or part of the compensation payments as not having been made. His submission was that the Tribunal should treat the entire compensation payment as not having been made, so that the CPP was zero.
Some support for the argument put by Mr Koutzoumis may be found in earlier decisions of the Federal Court by Von Doussa J,[24] and Merkel J.[25] Mr Koutzoumis referred to a decision of the Tribunal in Kelava.[26] There is also a recent Tribunal decision which supports this approach.[27]
[24] Secretary, Department of Social Security v Smith (1991) 30 FCR 56; Secretary, Department Social Security v a'Beckett (1990) FCA 332; (1990) 12 AAR 212, 222-223.
[25] Kertland v Secretary, Department of Family Services [1999] FCA 1596; (1999) 95 FCR 64.
[26] SDFaCS and Kelava [2003] AATA 834.
[27] Vucic and Secretary, Chief Executive, Centrelink 2020/S155801, decided on 8 February 2021.
More recent Federal Court authorities are, with respect, for the most part against a line of reasoning which finds special circumstances in the operation of the 50% rule itself.[28]
[28] Following Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67, (Chamberlain) per Kiefel J (as she then was); HGMZ v Secretary, Department of Social Services [2021] FCA 280 (HGMZ) at [60].
The facts of Clarke v Secretary, Department of Employment and Workplace Relations, [2007] FCA 1076 (Clarke) bear a strong resemblance to the present case. Mr Clarke had received a workplace injury before reaching his retiring age. The Workers Compensation Act 1987 (NSW) (WC Act) provided for statutory benefits. Section 52 of the WC Act provided that a payment was not to be made in respect of any resulting period of incapacity occurring after the first anniversary of the date on which the person reached the retiring age. The question arose whether the combined operation of the statutory formula and section 52 created a ‘special’ circumstance. At page 465 Lindgren J referred to a decision by Kiefel J in Chamberlain:
69 In Chamberlain [2002] FCA 67; 116 FCR 348 itself, the effect of the statutory formula was that the applicant would have to pay back more than twice the amount that had been allocated to loss of earnings and of earning capacity in her lump sum settlement. Nonetheless, her Honour thought that such a factor would be present in many cases and was simply an aspect of the outworking of the formula. Her Honour considered that it could not, by itself, amount to "special circumstances".
70 Like Mr Clark, Mrs Chamberlain was elderly. She was aged 60 years when, on 13 January 1999, she suffered personal injury in a motor vehicle accident. At the time she was in receipt of an age pension and she had previously received a disability support pension. She claimed to have been able and entitled to earn up to $50 per week from teaching music, without her pension entitlement being affected. Her claim was settled for $35,000 plus $4,000 for costs. The parties to the settlement allocated $31,500 to pain and suffering and medical expenses, and $3,500 to loss of earnings and of earning capacity.
71 Mrs Chamberlain had continued to receive the age pension from the time of the accident. At that time, it was ss 1165 and 1166 of the SS Act that provided for the lump sum preclusion period and refund in Mrs Chamberlain’s case, and s 1184 of the SS Act that provided for a discretion in the Secretary to treat the whole or part of a compensation payment as not having been made or not liable to be made if the Secretary should think it appropriate to do so "in the special circumstances of the case". Under s 17(3)(a), the compensation part of the LSP was $17,500. The preclusion period was arrived at by dividing that sum by $422.90, giving a period of 41 weeks. The period ran from the date of the injury, 13 January 1999, to 26 October 1999. The statutory formula produced the result that in respect of that period, Mrs Chamberlain was liable to pay to the Commonwealth $7,643.36 – more than twice the sum of $3,500 mentioned above.
72 Kiefel J stated (at [34]–[35]):
[34] The basis for the Tribunal’s view [that "special circumstances" were established] 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.
[35] 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. (emphasis added)
73 Her Honour set aside the Tribunal’s decision.
74 If Chamberlain [2002] FCA 67; 116 FCR 348 is to be followed, the present application must be dismissed.
I also note the recent decision of the Federal Court in HGMZ v Secretary, Department of Social Services [2021] FCA 280 (HGMZ) at [60] where Flick J stated:
[60] In further exposition of this proposed new Ground, reliance is placed by HGMZ (at least in part) upon the application of the “50 Per Cent” rule which was introduced by way of amendment to the Social Security Act by the Social Security Amendment Act 1988 (Cth). Her challenge to the application of this rule in the proceedings before the Tribunal was summarised as follows in the Tribunal’s reasons:
[53] The Applicant contends that she meets the requirements for exercise of the special circumstances discretion. She was subject to excessive legal fees and was provided with “negligent” legal advice. She says the application of the 50 per cent rule, whereby half of the payment is deemed compensation, is unfair in her circumstances.
In resolving HGMZ’s contention, the Tribunal placed reliance upon the observations of Kiefel J (when sitting as a Judge of this Court) in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67, (2002) 116 FCR 348 at 355 (“Chamberlain”), including the following observations of her Honour:
[33] 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.
Her Honour there set aside the Tribunal decision upon the basis that it had not “considered the facts put forward as personal to the applicant...”: [2002] FCA 67 at [36], (2002) 116 FCR at 356. Although a submission was advanced that the decision in Chamberlain was erroneous, it is (with respect) a decision which should be followed (authorities omitted).
I referred above to Kertland and Smith as providing some support for the applicant’s argument concerning section 1184K. In Chamberlain, Kiefel J described these decisions as exceptions to the general rule.
27 The question then is what can be taken into account as a "special circumstance". The Secretary's argument is that the 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. Counsel for Mrs Chamberlain relies upon two decisions of this Court in support of an argument that one may have regard to the true facts of a case: Kertland v Secretary, Department of Family Services [1999] FCA 1596; (1999) 95 FCR 64 and Secretary, Department Social Security v Smith, referred to above. In each case it was held that there was no error in the Tribunal's view that special circumstances existed.
28 In Smith (at 61-62) an argument was advanced for the Secretary that the circumstances of a case should be confined to matters which arise external to the operation of the scheme. Von Doussa J summarised it as follows:
"It is contended on the appellant's behalf that "the circumstances of the case" should be confined to matters which arise external to the operation of the scheme. An example of such a matter given in argument is where the payment by way of compensation is not received by the plaintiff because of a defalcation by an agent to whom the money is paid on his behalf. I do not think a distinction can meaningfully be drawn between matters external to the operation of the scheme and matters which are the product of the strict application of ss 152 and 153. The facts peculiar to a particular person cannot be considered in isolation from the operation of the provisions of ss 152 and 153. The operation of those sections in the light of the facts surrounding the person concerned is part of the circumstances of the case. The circumstances of a particular case will give rise relevantly to an unreasonable or unjust result only if the operation of Pt XVII, apart from the ameliorating provisions of s 156, produces that result."
29 Mr Smith had suffered a work-related injury but he had returned to light duties when he contracted hepatitis, as a result of which he received sickness benefits. He thereafter received a payment compensating him for his injuries and loss. It may be inferred from the facts there stated that it could not be said that it contained a payment for economic loss for the period when he received sickness benefits, because that entitlement operated to disentitle him from compensation payments. His Honour concluded (at 62):
"In my opinion the Tribunal did not fall into error by taking into account an irrelevant consideration when it said:
"To continue to deprive (the respondent) of that which was paid to him by virtue of his rightful entitlement to sickness benefit on the basis that he is to be taken to have been compensated for it, when in actual fact he was not, would in my view be unjust."
I agree with the Tribunal that the facts of this case are unusual. By virtue of the agreed facts it is established that during the period from 6 May 1988 to 31 October 1988 the incapacity for work was unrelated to the work injury. In the common run of cases it will not be possible to conclude that during a period of eligibility for a pension which follows a compensable injury attracting a payment by way of compensation within the meaning of s 152(2)(a) that the period of eligibility is unrelated to the compensable injury. The admitted absence of any relationship was a relevant circumstance of the case."
30 His Honour also went on to reiterate his view, earlier expressed in Secretary, Department Social Security v a'Beckett (1990) FCA 332; (1990) 12 AAR 212, 222-223, which had regard to the statutory assumption that there was an actual coincidence between a period during which pension payments were made and the period during which the pensioner received compensation for an incapacity to work. It was of some importance to his Honour's opinion that the object of the legislation, to prevent double payments for an inability to earn income, was not cut across by applying s 1184 in that case. The situation which was of concern to the statute was not present.
31 In Kertland there could have been no dispute that the applicant had not been compensated for economic loss in the settlement, since legislation (the Transport Accident Act 1986 (Vic)) precluded a person, who had been employed at the time of injury, from recovering compensation for economic loss for a period of eighteen months. His Honour likewise found the circumstances upon which the statute was predicated, namely compensation for economic loss in that period, not to be present.
32 In each of Smith and Kertland it may be said that their Honours took into account the true position. The facts of those cases were unusual. It does not follow that the true facts in every case will have that quality. In those cases it could be seen, objectively, that there could not have been a double payment. In such a circumstance it might be concluded that the statutory assumption operated unjustly. This would not seem to me a situation which would often arise and sets these cases apart from the usual.
In particular, I note the comment by Kiefel J in Chamberlain that:
35. 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. (emphasis added)
I note that Kiefel J did not opine that the earlier decisions in Kertland and Smith were wrong, or that they should not be followed. It may therefore be an overstatement to say that the 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. Chamberlain accepts that in some cases, it may be seen that ‘objectively’ there could not have been a double payment, and in such cases it might be concluded that the statutory assumption operated unjustly, but these cases were ‘unusual’.
In this case, there was no statutory preclusion from receiving compensation for economic loss, such as existed in Kertland. The present facts are also distinguishable from those in Smith, where the claimant was disqualified from receiving payments for economic loss while he was on sick leave following the accident. Section 13.3 merely precludes statutory benefits by the insurer beyond a certain point in time, defined in terms of the anniversary of a person’s eligibility for the age pension.
In my view, the present case is governed by Clarke. In that case, section 52 of the WC imposed a time limitation on receipt of statutory benefits; in this case it was subsection 13(3) of the MAIA. It is hard to see any substantial difference between the two cases. With respect, there may be a question whether Lindgren J was correct to consider the case before him as governed by Chamberlain, where the reasoning of Kiefel J did not turn on the application of a provision such as section 52 (or section 13). However, Clarke is binding on this Tribunal.
The 50% rule is undoubtedly a rule of administrative efficiency and avoids the need to identify the economic loss component in every case. It is also designed to avoid ‘gaming’ the system by artificial allocations to various heads of damages. There may be unusual cases where the ‘objective circumstances’ are such that the compensation payment did not include, and could not have included, a component for economic loss, but the present case does not fall into this category. An amount of $177,055.67 assigned for economic loss may well be a disproportionate amount in light of the applicant’s future work expectancy, but that does not of itself generate a special circumstance under section 1184K.[29]
[29] T8, 76.
I find that there are no special circumstances under section 1184K arising from the combined operation of section 17(3) of the Act and section 13.3 of the MAIA, such that the whole or part of the payment received by Mr Lazarov should be disregarded in calculating the CPP.
Personal Factors
Mr Koutzoumis did not seek to argue that ‘special circumstances’ could be found in factors personal to Mr Lazarov. He relied entirely on the supposedly unfair application of the 50% rule.
The AAT1 referred to the applicant’s overall financial position and could find no ground for the application of section 1184K, commenting that Mr Lazarov had been prudent in his use of the settlement money, retaining a sum for his future use.[30] Mr Koutzoumis did not challenge this finding. He provided adjusted figures relating to Mr Lazarov’s savings account, but did not suggest that Mr Lazarov was experiencing serious financial hardship.
[30] AAT1 at [27]: T2, 12.
The AAT1 referred to the applicant suffering from prostate and lung cancer.[31] On 14 September 2022, Mr Koutzoumis advised the Tribunal that Mr Lazarov’s health had deteriorated and that ‘the prognosis was not good’. He declined an invitation, conveyed from the Tribunal, to provide supplementary submissions with regard to the implications of this development.
[31] T2,12.
The Social Security Guide provides:
When to apply special circumstances
The special circumstances provision should only be applied in unusual, unforeseen or exceptional circumstances. Explanation: In order for “special circumstances” to exist, it must be possible to say that the circumstances in the case in question are “markedly different from the usual run of cases”. The circumstances must have “a particular quality of unusualness that permits them to be described as special”.
According to the Guide, ‘this means situations where the compensation provisions could lead, or have led, to extreme hardship, or created an inequitable or unjust or unreasonable situation.’
I agree with AAT1 that the applicant’s circumstances are not unusual, uncommon or exceptional, nor markedly different from the usual run of cases.[32] There are no circumstances taking his case out of the ordinary run of such cases.[33]
[32] Re Beadle and Director-General of Social Security (1984) 6 ALD 1.
[33] Re Drachinikov and Centrelink [2003] FCAFC 1333 at [66]; Groth and Secretary Department of Social Security (1995) FCA 1708 at [12].
I find that there are no special circumstances such that the whole or part of the compensation payment received should be disregarded in calculating the preclusion period.
DECISION
I therefore affirm the decision under review.
I certify that the preceding 61 (sixty-one) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member
................................[SGD]........................................
Associate
Dated: 7 October 2022
Date(s) of hearing: 28 July 2022 Solicitors for the Applicant: Mr Koutzoumis, Koutzoumis Lawyers Solicitors for the Respondent: Mr Hillyard, Sparke Helmore
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