Matijasevic; Secretary, Department of Families, Community Services and Indigenous Affairs and
[2007] AATA 1018
•19 January 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1018
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2006/868
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES & INDIGENOUS AFFAIRS Applicant
And
ANASTAZIJA MATIJASEVIC
Respondent
DECISION
Tribunal Ms N Isenberg, Senior Member
Mr S Frost, MemberDate19 January 2007
PlaceSydney
Decision The Administrative Appeals Tribunal sets aside the decision of the Social Security Appeals Tribunal dated 5 June 2006 and in substitution therefor, decides that, in respect of Mrs Matijasevic’s application for age pension dated 31 May 2005, a lump sum preclusion period applies from 25 May 2005 to 20 December 2005. ….......................[sgd]..............................
Ms N Isenberg, Senior Member
Mr S Frost, Member
CATCHWORDS
SOCIAL SECURITY – lump sum workers’ compensation payment not able to be dissected – preclusion period – policy underlying preclusion period – avoidance of “double dipping” – discussion of impact of preclusion period on different factual circumstances – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made – decision of the SSAT set aside.
Social Security Act 1991 – sections 17, 1169, 1170 and 1184K
Workers Compensation Act 1987 (NSW)
Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576
Secretary, Department of Social Security v Banks (1990) 20 ALD 19
Blunn v Cleaver (1993) 31 ALD 28
Re Secretary, Department of Employment and Workplace Relations and Demkowski [2005] AATA 1308
Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211
Beadle v Director General of Social Security (1985) 7 ALD 670
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Haidar v Secretary of Social Security (1998) 52 ALD 255
Groth v Secretary of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
REASONS FOR DECISION
19 January 2007 Ms N Isenberg, Senior Member
Mr S Frost, Member
DECISION UNDER REVIEW
1. The decision under review is a decision of the Social Security Appeals Tribunal (“SSAT”) that the sum of $19,452.92 received by Mrs Matijasevic be treated as not having been made such that no preclusion period applies and that Mrs Matijasevic’s claim for age pension made on 31 May 2005 be granted.
BACKGROUND
2. Mrs Matijasevic was injured at work on 3 March 2000. She claimed compensation and received weekly payments and medical expenses up until 19 November 2002 when her claim was rejected. She brought proceedings in the Compensation Court of New South Wales.
3. Mrs Matijasevic was awarded lump sum compensation for the permanent loss of use of both arms, permanent impairment of the neck and associated pain and suffering totaling $34,187.50.
4. She was also awarded weekly payments of compensation at the maximum rate from 19 November 2002 to date and continuing. The insurer later calculated the amount of arrears of weekly compensation to be $19,452.92 and paid that amount to Mrs Matijasevic.
5. Her weekly compensation payments ceased on 24 May 2005. Within a few days she applied for age pension. A preclusion period from 25 May 2005 to 14 March 2006 was initially applied. The end date was later changed to 20 December 2005.
6. Mrs Matijasevic sought a review of that decision. Her case was considered by the SSAT, which decided that, because “special circumstances” existed, the payment to her of the $19,452.92 should be treated as not having been made. The effect of this decision is that there would be no preclusion period. From that decision Centrelink appealed to this Tribunal.
ISSUE BEFORE THE TRIBUNAL
7. The first issue is whether the receipt by Mrs Matijasevic of the sum of $19,452.92, arrears of weekly compensation, creates a lump sum preclusion period. If it does, then there is a second issue. That is whether there are special circumstances that make it appropriate to treat Mrs Matijasevic’s compensation payment as not having been made or not liable to be made. Specifically, whether:-
· the operation of the preclusion period resulted in unfairness to the respondent, such as would enliven the discretion contained subsection 1184K(1) of the Social Security Act 1991 (“the Act”); and
· the respondent’s additional circumstances can be considered as being special circumstances under subsection 1184K(1).
LEGISLATION
8. Section 1169 of the Act provides effectively, that, where a lump sum payment has been received, a pension is not payable during a lump sum preclusion period, which is calculated by a formula that depends on the amount of the lump sum compensation payment.
9. Section 1170 sets out a formula to be used to calculate the length of a lump sum preclusion period.
10. Section 1164 provides that certain lump sums are to be treated as though they were received as periodic compensation payments. Also, subsection 17(4A) provides that for the purposes of the Act a payment of arrears of periodic compensation payments is not a lump sum compensation payment.
11. Subsection 17(2) defines “compensation”, and subsection 17(3) specifies how to work out the “compensation part” of a lump sum compensation payment.
12. Once all the relevant provisions have been applied, section 1184K of the Act provides potential relief from the strict application of the compensation preclusion period, by providing the Secretary (and, on review, this Tribunal) with a discretion to disregard whole or part of the compensation payment in “special circumstances”.
13. A copy of these sections is annexed to this decision.
DISCUSSION AND FINDINGS
14. In coming to the correct and preferable decision, we took into account all the evidence, submissions, case law and relevant legislation.
15. Mrs Matijasevic contends that s1170(4) requires the Secretary to determine the compensation part of the lump sum and that s17(3) defines the compensation part of the lump sum.
16. She also contends that s1164 applies to the payment of $19,452.92 so that she is dealt with under the Act as if she had received that amount as fortnightly payments. That section however, appears to relate to redemptions under the Workers Compensation Act 1987 (NSW).
17. Mrs Matijasevic also contends that the lump sum compensation payment received by her is $34,187.50 and neither s17(3)(a) nor (ab) applies because she did not settle her claim or receive her periodic payments entitlement as a lump sum.
18. She contends that Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576 (see below) is clearly distinguishable in that Ms Cunneen settled her claims for a lump sum including her claim for future economic loss whereas Mrs Matijasevic was awarded an ongoing weekly payment for her loss of capacity to earn.
19. We were referred by the Respondent to the Federal Court decision in Secretary, Department of Social Security v Banks (1990) 20 ALD 19 where Von Doussa J. held that it was incorrect to break down the lump sum payable to Mr Banks by excluding from the calculations a sum of $1000 which was said to be in respect of future medical expenses. The meaning of “lump sum” was discussed at 24:
“The words "lump sum" are not defined. They are not words of art. In the Macquarie Dictionary a "lump sum" is defined as a sum "including a number of items taken together or in the lump". In my opinion the words bear that meaning in the section. The words are used in Part XVII of the Act to distinguish "lump sum payments by way of compensation" from "periodical payments by way of compensation" (see, for eg ss 152(2)(d), 152(3)(b), and 153(1)(a)). A “lump sum" payment is simply one which includes a number of items. Where a payment by way of compensation consists of the aggregate of several amounts which could have been paid separately or at different times the payment is one of a lump sum. A payment the total of which is arrived at by adding amounts for different heads of loss would also be a lump sum payment.”
20. Von Doussa J. further noted at 26:
“The wide language of sub-para (i) is a recognition by parliament that unless every component part of a lump sum payment made in settlement of a claim which has the prescribed characteristics is brought to account the mischief to which paragraph (c) is directed will not be remedied. The scope for manipulation by inflating some heads of loss and diminishing or excluding others, without altering the total amount of the lump sum, would otherwise remain.”
21. We note that when Banks was decided, the Act did not contain a provision in the nature of the current s 17(4A).
22. Mr Watts, who appeared for Mrs Matijasevic, referred us to Blunn v Cleaver (1993) 31 ALD 28, a decision of the Full Federal Court on a question of law referred under s 45 of the Administrative Appeals Tribunal Act 1975. That question was whether, under Part 3.14 of the Act, a compensation payment made to Mr Cleaver was properly characterised as “periodic compensation payments” or as “compensation in the form of a lump sum”.
23. The circumstances of Mr Cleaver’s case were that he had suffered an injury in the course of his employment with the Commonwealth. Under the relevant workers’ compensation legislation, a determination was made that the Commonwealth was liable to pay weekly amounts of compensation for a number of specified (past) periods covering a time span of around 15 months. Once the total entitlement was calculated, the employer made the payment, although it was adjusted to take account of, among other things, certain social security benefits that had been paid for some of those qualifying periods.
24. The resolution of the question referred to the Full Court would, for practical purposes, determine whether those adjustments were correct.
25. The Full Court examined the history of the legislation and stated at 38:
“The Explanatory Memorandum circulated in relation to the Social Security Legislation Amendment Bill 1992 described one of the changes to be effected by that bill as a change which would ‘’clarify the difference between lump sum settlements and payments which are in effect arrears of weekly payments’’. The change referred to was clearly the proposed amendment of s 17 of the principal Act to insert a new subs (4A). The Explanatory Memorandum circulated in relation to the Social Security Legislation Amendment Bill (No 2) 1992 contained the following:
‘The third change clarifies the treatment of the receipt of arrears of periodic compensation payments. The intention is that such payments are to be regarded as periodic payments (eg weekly, in workers’ compensation cases) that happen to be paid in a “lump sum”. These payments are not true lump sums for the purposes of these provisions and the amendments make it clear that, while they may be paid in a “lump sum”, they are to be regarded as having been received on a periodic basis.
…’ ”
26. The Full Court then held at 360:
“We see nothing incongruous in treating a person who receives a single payment which is made up of weekly amounts of compensation in respect of a number of consecutive weeks as being the recipient of a series of periodic compensation payments.”
27. It should be emphasised that the payment made to Mr Cleaver was one single sum, made up of nothing other than a number of weekly compensation amounts.
28. We were also referred by the Respondent to Cunneen in which Foster J cited Banks with approval. He noted at 581 in relation to section 17(4A):
“The purpose of the provision was to ensure that where a payment was simply a total of previously unpaid periodic payments it would not, thereby, acquire the characterisation of a "lump sum compensation". The section, in my view, was not intended to apply where a payment of arrears of periodic compensation did not stand alone but was included as a component in a larger "lump sum" payable as “compensation" within the meaning of s 17(2).
I have accepted the primary submission made by counsel for the Secretary, namely that it was an error of law on the part of the Tribunal to have, in effect, regarded each component of the total sum payable as being "lump sum compensation payments" in themselves. The proper construction of the legislation required that it characterise the total sum payable not the individual parts. If, having done so, the total sum qualified for the legislative description of a "lump sum compensation payment" then the provisions of s 17(3) would be applicable.”
29. Blunn v Cleaver is distinguishable from the case before us because it dealt with the treatment of a single payment of arrears entitlements: a payment of the kind that Foster J no doubt had in mind when he referred in Cunneen to “simply a total of previously unpaid periodic payments”. As for Banks, the legislation dealt with there is not distinguishable from the law as it stood when Mrs Matijasevic’s pension claim was made (even allowing for the fact that the section numbering is different). That decision, binding upon us, leads us to the conclusion that Mrs Matijasevic received a lump sum compensation payment of $53,640.42 in November 2003, and that the lump sum cannot be broken down into its component parts.
30. The legislation in Cunneen is relevantly identical to that which applies to Mrs Matijasevic’s claim. That decision, also binding upon us, confirms that subsection 17(4A) does not apply in relation to the payment of the $19,452.92 representing the arrears of weekly compensation. This is consistent with the Tribunal’s approach in ReSecretary, Department of Employment and Workplace Relations and Demkowski [2005] AATA 1308.
31. Therefore, section 1169 operates to impose a lump sum preclusion period.
32. The “compensation part” of the lump sum of $53,640.42, in accordance with section 17(3)(b), is $19,452.92. We accept that neither paragraph (a) nor (ab) of section 17(3) applies.
33. The lump sum preclusion period is calculated under section 1170.
34. Mrs Matijasevic’s circumstances are covered by subsection one and, as a result, the lump sum preclusion period begins on “the day following the last day of the periodic payments period”. This will be the case whether a person receives the periodic compensation payments before or after receiving a lump sum compensation payment, or indeed (as in Mrs Matijasevic’s case), receives periodic compensation payments both before and after receiving a lump sum compensation payment.
35. It may be noted that a person who receives periodic compensation payments after (or both before and after) receiving a lump sum compensation payment may be somewhat disadvantaged as against one who receives periodic payments only before receiving the lump sum payment. This is because, although the preclusion period starts in each case on “the day following the last day of the periodic payments period”, the periodic payments period is likely to end somewhat earlier for the person receiving the periodic payments before the lump sum, and the preclusion period will end correspondingly sooner.
36. Subsection 1170(1) can lead to other curious outcomes. Suppose a case where the “arrears” of weekly compensation entitlements are paid, as in Mrs Matijasevic’s case, as part of a lump sum containing also a pain and suffering component, but in circumstances where the recipient of the payment is 60 years of age, has an entitlement to ongoing weekly payments, and becomes eligible for the age pension at 65 years of age. The preclusion period would commence, as it did in Mrs Matijasevic’s case, when the weekly compensation payments cease – one year after the recipient reaches pension age – even though the “compensation part” of the lump sum payment was received six years earlier. Perhaps that is the type of case that would readily justify the exercise of the “special circumstances” discretion.
37. Ms Schuster, who appeared for Centrelink, contended that the purpose of the preclusion period provisions is to prevent “double dipping” although, as can be seen in Mrs Matijasevic’s case and also in the hypothetical case just described, there is no period in which the claimant would be receiving both compensation payments and social security payments.
38. Even accepting that the purpose of the provisions is to prevent “double dipping”, nevertheless the language of the provisions is clear. Moreover, there is no reason to suppose that the intention of the Parliament was anything other than to achieve the outcome to which the words naturally lead. We find that the preclusion period commences on 25 May 2005. It was not disputed that, if we found that to be the case, then the preclusion period would end on 20 December 2005.
Special Circumstances
39. It is well established that section 1184K is designed specifically to enable the Secretary to ameliorate unfairness or injustice which results from the strict application of the Act (Kirkbright v Secretary Department of Family and Community Services (2000) 65 ALD 211). In Cunneen it was specifically noted at 584 that:
“…if the application of what is an essentially arbitrary rule produces genuine hardship, then, clearly, the Secretary may act under s 1184 [now 1184K] to alleviate that hardship.”
40. The discretion to disregard the whole or part of a compensation payment can be exercised where application of the usual rules would lead to a result that is unfair or inappropriate (see Beadle v Director General of Social Security (1985) 7 ALD 670 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570).
41. Section 1184K is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. Special circumstances do not have to be statistically “extreme” or “unique”; it is sufficient if there is something that takes the matter out of the usual ordinary case (see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).
42. In the context of the discussion in paragraph 36 above, we note that the lump sum payment was made to Mrs Matijasevic in November 2003. She reached pension age in May 2004 and her periodic compensation payments ceased twelve months later, in May 2005. Therefore there was a period of only 18 months between the receipt of the lump sum payment and the commencement of the preclusion period. There was some evidence before the SSAT that Mrs Matijasevic’s husband is disabled and that Mrs Matijasevic requires her daughter’s assistance in caring for him. No further submission was made at the hearing in relation to this aspect of her case.
43. We have come to the view that Mrs Matijasevic’s circumstances are not special in that there is nothing out of the ordinary in her case compared to other welfare recipients (per Haidar). We do not consider that the application of the usual rules would lead to a result that is unfair or inappropriate (per Beadle).
DECISION
44. Accordingly we set aside the decision of the SSAT and in substitution therefor we decide that a lump sum preclusion period applies from 25 May 2005 to 20 December 2005.
I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member and Mr S Frost, Member.
Signed: ............[Emily Gadsby].......................
AssociateDate of Hearing 14 December 2006
Date of Decision 19 January 2007Advocate for the Department Ms H Schuster, Centrelink Legal Services Branch
Counsel for Mrs Matijasevic Mr J Watts
Solicitor for Mrs Matijasevic Ms B Dwyer, Back Schwartz Vaughan Solicitors and Attorneys
Annexure A
Social Security Act 1991
Compensation
17(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.
Compensation part of a lump sum
17(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.
17(4A) For the purposes of this Act, a payment of arrears of periodic compensation payments is not a lump sum compensation payment.
1164 Certain lump sums to be treated as though they were received as periodic compensation payments
If:
(a) a person was entitled to periodic compensation payments under a law of a State or Territory; and
(b) the person’s entitlement to the periodic payments was converted under the law of the State or Territory into an entitlement to a lump sum; and
(c) the lump sum was calculated by reference to a period;
this Part applies to the person as if:
(d) the person had not received:
(i) the lump sum; or
(ii) if the lump sum was to be paid in instalments—any of the instalments; and
(e) the person had received in each fortnight during the period a periodic compensation payment equal to:
where:
lump sum amount is the amount of the lump sum referred to in paragraph (b);
number of fortnights in the period is the number of whole fortnights in the period referred to in paragraph (c).
1169 Compensation affected payment not payable during lump sum preclusion period
1169(1) If:
(a) a person receives or claims a compensation affected payment; and
(b) 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 preclusion period.
1169(2 )In this section:
lump sum compensation payment does not include a lump sum payment:
(a) to which section 1164 applies; or
(b) that relates only to arrears of periodic compensation payments.
1170 Lump sum preclusion period
1170(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a) begins on the first day on which the person’s periodic compensation payment is a reduced payment because of that choice; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
1170(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.
1184K Secretary may disregard some payments
1184K(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.
1184K(2) If:
(a) a person or a person’s partner receives or claims a compensation affected payment; and
(b) the person receives compensation; and
(c) the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s or the person’s partner’s receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).
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