Macri and Secretary, Department of Family and Community Services
[2005] AATA 175
•1 March 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 175
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2004/147
GENERAL APPEALS DIVISION ) Re GARY MACRI Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Ms L Savage Davis, Member Date1 March 2005
PlacePerth
Decision The Tribunal affirms the decision under review.
.......(sgd L Savage Davis)....
Member
ADMINISTRATIVE APPEALS TRIBUNALü
ý No W2004/147
GENERAL ADMINISTRATIVE DIVISION þRe:GARY MACRI
Applicant
And:SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DIRECTION TO AMEND WRITTEN REASONS FOR DECISION [2005] AATA 175
Tribunal: Ms L Savage Davis, Member
Date: 23 May 2005
Place: Perth
WHEREAS:
1. The Tribunal made a decision on 1 March 2005;
2. It has come to the Tribunal’s attention that there is an obvious error in the reasons for that decision;
3. The Tribunal wishes to amend the decision pursuant to s. 43AA of the Administrative Appeals Tribunal Act 1975;
NOW THE TRIBUNAL THEREFORE DIRECTS that the registrar alter the text of the written reasons for the decision:
1.in point 4, line 14 of paragraph 10 of the Tribunal's Reasons for Decision, by deleting the words “this broad interpretation”.
………(sgd L Savage Davis)....…..
Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – compensation – salary continuance payments as compensation not ordinary income - chronic fatigue syndrome - personal injury- contribution to insurance scheme.
Social Security Act 1991 ss 17(1), 17(2), 17(2A), 98(1), 98(2), 1160(1), 1173(1), 1173(2)
Kennedy Cleaning Services Pty Ltd v Petoska [2000] HCA 45
Darrin Zickar v MGH Plastic Industries Pty Ltd (1996) HCA 31
Banks and Department of Family & Community Services [2001] AATA 183
Watson v Ramsay [1960] NSWR 462
Re Gentley and Secretary, Department of Family and Community Services [2001] AATA 561
Re Secretary, Department of Family & Community Services and Johnson [2003] AATA 243
Wallace-Smith and Another v Secretary, Department of Family & Community Services [2004] VSC 123
Commissioner of Taxation of the Commonwealth of Australia v Scully [2000] HCA 6
REASONS FOR DECISION
1 March 2005 Ms L Savage Davis, Member
1. This is an application by Mr Gary Macri (“the applicant”) for a review of a decision made by Centrelink on 25 September 2003 to assess monthly ongoing salary continuance payments as compensation and as a consequence a direct deduction from his disability support pension. This decision was affirmed by the Social Security Appeals Tribunal (SSAT) on the 22 March 2004.
2. The applicant was represented at the hearing by his wife, Mrs Bernadette Macri. Mr Harley Pope, a solicitor from the Australian Government Solicitor represented the respondent. The Tribunal had before it the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (the T-documents) (T1-T27), the respondent’s Statement of Facts and Contentions with attachments filed on the 9 November 2004 and Exhibit A1 (Australian Casualty and Life, Group Salary Continuance Policy Schedule – Policy Nos – G29633). Mr and Mrs Macri gave oral evidence to the Tribunal.
background
3. It was not in dispute that Mr Macri had been in receipt of salary continuance payments of $3,750 per month since 1997 as a result of being diagnosed with chronic fatigue syndrome whilst employed by Process Control Technologies Pty Ltd (“PCT”). Mr Macri commenced receiving disability support pension (“DSP”) in 1998 in addition to the salary continuance payments (“payments”). These payments were initially treated as ordinary income for the purpose of assessing his rate of DSP. Following a review in 2003 a decision was made on 25 September 2003 that his salary continuance payments should be treated as compensation. This decision was affirmed by an authorised review officer on the 4 November 2003 and the SSAT on the 22 March 2004.
4. The following issues were identified by the Tribunal and the parties as being in contention, namely:
(a)was chronic fatigue syndrome a personal injury for the purposes of the Social Security Act 1991 (the Act);
(b)was the salary continuance payment of $3,750 per month compensation or ordinary income for the purposes of the Act; and
(c)if the salary continuance payment was compensation, did Mr Macri contribute to the insurance scheme that pays the salary continuance payment?
mr and mrs macri’s evidence
5. Mrs Macri told the Tribunal that their main argument at the SSAT was that chronic fatigue syndrome (“CFS”) was not a personal injury. They believed the SSAT had accepted this proposition although it was not reflected in the SSAT decision. Mrs Macri said that it was very important to them that the Tribunal address this issue and explain to them how CFS could be described as a personal injury.
6. Mrs Macri told the Tribunal they believed that compensation in the Act meant a situation when someone is injured by another. Mrs Macri said on a Medicare brochure she had seen it stated that a compensation payment was a sum of money paid to a person who has been injured or suffered an illness due to negligence or lack of care by another person. Mr Macri was being paid salary continuance payments because he could no longer work due to CFS. She explained that CFS was diagnosed by exclusion so it could not be classed as personal injury although they accepted it was a recognised medical condition. Mrs Macri said she had looked at the legislation and believed that the term “personal injury” was inserted to distinguish personal injuries from conditions such as CFS which were unrelated to the workplace. They accepted that it was because of the CFS that Mr Macri was being paid salary continuance payments. Mrs Macri said his doctors had had to put in a lot of documentation for it to be accepted by the insurance company.
7. Mrs Macri referred the Tribunal to T5 which was the letter to Mr Macri offering him employment. She said this was evidence that the cost of the salary continuance insurance which paid for the salary continuance payments was part of his salary package. Mr Macri said that it was now 8 years since he first started work for PCT and there was no one left to explain how it worked. It was only offered to the few people who were full time employees rather than on contract. Most engineering staff were on contract. Mr Macri said he commenced the job without the insurance policy which came into effect after a 6 months qualifying period. PCT paid the cost of the policy and no deductions were made from his salary. Mr Macri said he had had to prove he was worth the extra benefits. If he hadn’t been given the salary continuance insurance as part of his package after 6 months he would have been asking for a salary increase as an alternative.
8. In cross-examination, Mr Macri said that he had specific discussions with his employer prior to taking a job about the salary continuance insurance, as well as superannuation. Mr Macri agreed this policy was already in place for other employees. He did not know how many others were covered by it but knew that there were a few. He said clerical staff were included on the policy. He agreed that all full time employees received it. Mr Macri agreed that it was only in the T- documents and evidence today that Mr Macri had said that the remuneration package that he negotiated was on the basis that PCT would pay salary continuance insurance. Mr Macri said he had only raised this now because it had been very difficult to know what information was important. Mr Macri said he negotiated his contract with Mr Bruce Phillips. He said that he had not asked Mr Phillips to appear for him because he had to deal with PCT every month and this was already stressful. Mr Macri did agree that he was not the first or last employee with PCT to be covered by salary continuance insurance.
Applicant’s Submissions
9. On behalf of the applicant it was submitted that:
·there are no identifiable internal or external physiological changes associated with CFS; CFS is not caused by an accident or someone’s negligence, it just happens.
·the case of Kennedy Cleaning Services Pty Ltd v Petoska [2000] HCA 45 referred to by the respondent involved a sudden and identifiable physiological change. This it was submitted was not the case with CFS.
·the generally understood meaning of the term “compensation” was “something where you can actually claim recourse from some other party for an injury or an illness.” That was not the case in the applicant’s situation.
·the offer of employment included the Salary Continuance Policy as an addition to the normal salary. The applicant otherwise would have negotiated a higher salary.
·there had been no attempt to “double dip” as the applicant’s rate of DSP had been reduced already on the basis of the salary continuance payments being treated as ordinary income.
Respondent’s Submissions
10. On behalf of the respondent the Tribunal was referred to a number of cases and the submissions that were made can be summarised as follows:
·for the purposes of section 17(2) of the Act it provided as follows:
“Compensation
17(2) 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) that is:
(e)made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f)made either within or outside Australia.”
·the respondent submitted that the payments are clearly “payment(s) under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including under a contract entered into under such a scheme” for the purposes of s 17(2)(b). Further that the payments were clearly made to the applicant under “an insurance scheme”, a scheme entered into by his former employer with AXA Group Insurance. Accordingly, the salary continuance payments made to the applicant fall within the meaning of compensation provided by s 17(2)(c);
·in 2001, section 17(2) was amended to read:
“Compensation
17(2) Subject to subsection (2B), for the purposes of this Act, compensation means:
(g)a payment of damages; or
(h)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
(i)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(j)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.”
·it was submitted that the Family and Community Services Legislation (Simplification and Other Measures) Act 2001 (Cth.), which amended the definition of compensation provided by section 17(2) was not intended to make substantive changes to the section. The insertion of the term “personal injury” was intended to broadly refer to anything which may prevent a person from working, such as an actual injury, disease or condition. The Tribunal was referred to the High Court decision of Commissioner of Taxation of Commonwealth of Australia v Scully [2000] HCA 6 in support of a definition of personal injury that does not exclude disease. The Tribunal was also referred to Kennedy (supra) and Darrin Zickar v MGH Plastic Industries Pty Ltd (1996) HCA 31. It was also submitted that section 17(5A) of the Act supports an interpretation of entitlement to compensation as being for a disease, injury or condition. this broad interpretation. The respondent contends therefore that the amended version of section 17(2) applies to the applicant’s salary continuance payments in the same way as the pre-amendment version.
·it was submitted that the applicant’s salary continuance payments may also be considered as compensation under subsection 17(2)(b) and (d) of the Act.
·Section 17(2A) of the Act it was submitted may apply in order to exempt payments from the definition of ‘compensation’:
“17(2A) Paragraph 2(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b)either:
(i)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments; or
(ii)the agreement does so provide but the compensation payment has been calculated without reference to the provision.”
·The respondent contends, section 17(2A) cannot be applied in the applicant’s circumstances to exempt the payments from the provisions relating to compensation;
·the respondent submits that Part 3.14 of the Act contains legislative provisions for the reduction, repayment or non-payability of a compensation affected payment where a person, or a person’s partner, receives compensation. Section 1160(1) of the Act provides:
1160(1) This Part operates in certain specified circumstances to do one or more of the following:
(a)reduce a person’s compensation affected payment;
(b)render a person’s compensation affected payment not payable;
(c)require the repayment of some or all of a person’s compensation affected payment;
because of the receipt of compensation by the person or the person’s partner.”
·Sections 1173(1) and 1173(2) of the Act provide:
1173(1) If:
(a) a person receives periodic compensation payments; and
(b)the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and
(c)the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;
the rate of the person’s compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).
1173(2)The person’s daily rate of compensation affected payment is reduced by the amount of the person’s daily rate of periodic compensation.”
11. The respondent submitted that the applicant was in receipt of periodic compensation payments at the same time he was receiving a compensation affected payment in September 2003, and therefore his DSP should be reduced by the daily amount of periodic compensation. As this daily amount exceeds the rate of DSP payable, the applicant’s DSP was not payable in accordance with section 1160(1) (b) of the Social Security Act 1991.
Consideration and Decision
12. The applicant has asserted that the CFS he suffers from is not the result of personal injury and that this is the critical issue to be resolved because it determines whether there are any subsequent issues to address. He submits in effect that if CFS is not a personal injury, the salary continuance payments he receives could not be described as compensation as defined in s 17(2) of the Act.
Personal Injury
13. The term “personal injury” is not defined in the social security law. The Explanatory Memorandum to the Family and Community Services Legislation (Simplification and Other Measures) Act 2001 (“the Simplification Act”) makes no specific reference to the insertion of the term “personal injury”. In reference to s 17(2) it says it “… is a technical amendment to subsection 17(2) that is consequential on new subsection 17(2B) that is being inserted by Item 10.” Subsection 17(2B) provides no assistance as it concerns the exclusion of compensation for criminal injury. Section 17(5A) of the Act can be read to assume that the events that can give rise to the payment of compensation that affects compensation affected payments such as DSP include disease, injury or a condition caused by an accident or in any other case. The Tribunal understands “in any other case” to mean arising in ways other than by an accident. The Tribunal was referred to Commissioner of Taxation of Commonwealth of Australia v Scully [2000] HCA 6. In that decision Justices Gaudron, McHugh, Gummow and Callinan stated at paragraph 2 in respect to subsection 27A(1) of the Income Tax Assessment Act 1936 ;
“We see no reason to think that “personal injury’ in par (n) excludes disease, illness or infirmity (32), which the respondent’s construction of s 37G requires. Nor does there seem to us any reason in principle or policy why “personal injury” should be so limited.”
14. The Tribunal has therefore formed the view that “personal injury” for the purposes of the Act includes illnesses and recognised medical conditions such as CFS.
Salary Continuance Payments as Compensation for the purpose of the Act
15. Having decided that CFS is, for the purpose of the social security law a personal injury, the Tribunal considered whether the salary continuance payments fell within the definition of compensation for the purposes of the Act.
16. Compensation is defined in s 17(2) of the Act both prior to, and following the amendments in 2001 to include “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.” (Section 17(2)(b)). The evidence before the Tribunal was that PCT prior to employing Mr Macri entered into a contract with Australian Casuality and Life (Exhibit A1) which commenced on 1 March 1996. The payments then are payments made under a contract of insurance but there is no evidence before the Tribunal that they were made “..under a scheme of insurance or compensation under a Commonwealth, State or Territory law..”
17. The salary continuance payments can however be characterized as compensation under s 17(2)(d) of the Act which includes any “other compensation or damages payments”. An examination of the policy (Exhibit A1) and the evidence before the Tribunal confirms that the salary continuance payments were made to Mr Macri because he was prevented from undertaking his normal duties for his employer due to CFS. In Box 7 of the policy schedule they describe the benefit as being “75 percent of income”. They can also be described as required by s 17(2) of the Act as “periodic compensation payments” in that they are paid periodically and Mr Macri has received a number of them. The compensation payments must also be made in respect to lost capacity to earn, a condition the Tribunal also finds to be satisfied on the evidence before it. The Tribunal took into account that a Medicare brochure stated that compensation payments can be sought based on another’s negligence. However these may also be paid, as they have to Mr Macri, due to sickness without any evidence as to causation. The Group Salary Continuance Policy itself specifically states in Box 9 the benefit under the policy is payable to age 65 for either injury or sickness.
18. Having already found that the compensation is being paid as a result of personal injury, namely CFS, the Tribunal is therefore satisfied that the applicant’s salary continuance payment of $3,750 per month is correctly described as compensation and not ordinary income.
Has the applicant contributed to the Group Salary Continuance Policy
19. The next issue to consider is whether the monthly payments made to Mr Macri come within the exceptions to s 17(2)(d) of the Act. Prior to amendment by the Simplification Act s 17(2) provided:
17.(2A) Paragraph (2)(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments.
20. Following amendment in 2001 it provides:
17(2A) Paragraph 2(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b) either:
(i)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments; or
(ii)the agreement does so provide but the compensation payment has been calculated without reference to the provision.
21. Mr Macri did not contribute to payment of the Group Salary Continuance Policy (Exhibit A1). This policy was paid for by PCT who was also the policy owner. Mr Macri asserted, however, that the amount the policy cost PCT was in effect part of his salary package and he negotiated it. The offer of employment to Mr Macri dated 24 June 1996 (T5 pp17-18) says in paragraph 2:
“The salary for this position of $60,000 per annum including 6% Superannuation Guarantee Levy. In addition, PCT will pay the cost of salary continuance insurance following a qualifying period of six months with the company.”
22. Mr Macri agreed in evidence that if PCT had not paid the cost of the salary continuance insurance after the 6 months qualifying period he would have been asking for additional money in some form. As it happened PCT commenced paying the insurance 6 months after Mr Macri commenced work. Mr Macri was not clear how many other employees also had the cost of the salary continuance policy paid on their behalf but there is no doubt that Exhibit A1 demonstrates that it was a group policy (see Part A, para 2) that began on 1 March 1996 and that based on Mr Macri’s evidence he was not the first or only employee at PCT covered by the policy. The Tribunal does not accept that Mr Macri can be described as making a contribution towards this policy as a required under s 17(2A) of the Act. PCT's undertaking to pay for the policy required Mr Macri to complete a qualifying period. Once the qualifying period finished the policy was paid for by PCT on Mr Macri’s behalf as it was for a number of employees.
The effect of the salary continuance payments on the applicant’s DSP
23. As set out above ss1160.(1) 1173.(1) and 1173.(2) in Part 3.14 of the Act provide for the reduction, repayment or non payability of a compensation affected payment when a person or a person’s partner receives compensation. Mr Macri was in receipt of salary continuance payments, which are periodic payments of compensation within the meaning of the Act. DSP is a compensation affected payment (s 17(1) of the Act). This affects his rate of DSP by way of a direct deduction in accordance with sections 1173(1) and 1173(2) of the Act. The amount of compensation he receives results in a nil rate of payment of DSP in accordance with s 98(1) of the Act.
24. In accordance with s 43 of Administrative Appeals Tribunal Act 1975 the Tribunal affirms the decision under review.
I certify that the 51 preceding paragraphs are a true copy of the reasons for the decision herein of Ms L Savage Davis, Member
Signed: ..........(sgd E Jordan)............
AssociateDate/s of Hearing 14 December 2004
Date of Decision 1 March 2005
Counsel for the Applicant Self Represented
Solicitor for the Applicant Self Represented
Counsel for the Respondent Mr Harley Pope
Solicitor for the Respondent Australian Government Solicitor
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