Maxwell Morrison and Secretary, Department of Social Services
[2014] AATA 825
•4 November 2014
[2014] AATA825
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/1031
Re
Maxwell Morrison
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Ms S Taglieri (Member)
Date 4 November 2014 Place Hobart The Decision to reject the Applicant’s claim for Disability Support Pension because his compensation preclusion period did not expire until 5.10.16 is set aside; the matter is remitted to the Respondent to give effect to the conclusion at paragraph 26 of the attached reasons.
........................................................................
Ms S Taglieri (Member)
CATCHWORDS
Compensation preclusion period; correct amount of compensation part of lump sum compensation payment; whether special circumstances and whether discretion to disregard a part of lump sum should be exercised.
LEGISLATION
Social Security Act 1991 (SS Act); sections 17, 1170, 1171 and 1184K
CASES
Hull v SDSS (1991) FCA 58
SDSS v Banks (1990) FCR 410
Fuller v SDFCS (2004) AATA 615
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28
Beadle v Director General of Social Security (1985) 60 ALR 225
Martin v SDSS [1990] AATA 768
SDSS v Gardiner [1991] AATA 112
Barrington v SDEWR [2006] FCA 527SDSS v Thompson (1994) FCA 1477
REASONS FOR DECISION
Ms S Taglieri (Member)
INTRODUCTION
Mr Morrison suffered serious injuries on 21 February 2003 at his workplace. He received workers compensation payments and also pursued a damages claim in respect of the injuries. He settled his damages claim on 10.9.2007. Centrelink notified Mr Morrison that a lump sum preclusion period applied to him, such that he would not eligible to receive payments from them for the period 9.8.07 to 5.10.16 (the preclusion period).
Mr Morrison made a claim for a Disability Support Pension (DSP) on 30 October 2013. The Respondent rejected the claim on 11.11.2013 on grounds that he was not eligible to receive DSP because the preclusion period had not expired.
This application relates to the decision about the preclusion period. The hearing of the application was conducted ex-parte on 9 September 2014 as Mr Morrison did not attend in person. He advised by phone at the start of the hearing that he agreed that the Tribunal should hear the application on the basis of the T Documents. He said that he had nothing to add by way of further evidence or submissions. For this reason, there is limited evidence about how and when the settlement payments were received, and also how they were expended.
The issues are whether the preclusion period was correctly determined by Centrelink and whether there are special circumstances that warrant shortening of the preclusion period.
WAS THE PRECLUSION PERIOD CORRECTLY DETERMINED?
The preclusion period is to be determined according to section 1170 of the Social Security Act 1991 (SS Act). In this case there is a dispute about the correct amount of the “Compensation Part of a lump sum compensation payment” (CPLSCP). Relevant to determining the CPLSCP are Sections 17(2), 17(3) and 17(4) of the SS Act. They require identification of the lump sum compensation payment and deduction of periodic compensation repaid to the workers compensation insurer and a 50% multiplication. In determining the CPLSCP, section 1171 may be relevant if there is more than one lump sum payment.
The terms of Mr Morrison’s settlement[1] identify that there was agreement to pay Mr Morrison $650,000 for damages and $125,000 for party/party costs. The terms of settlement refer to other payments as between co-defendants in the proceedings before the court, but they are irrelevant to the issues on this review.
[1] Page 11 of the T Documents
Of the sum of $650,000 for damages, Centrelink was told, and there is no evidence to the contrary before the Tribunal, that there was a liability to repay periodic compensation of $76,380.78.[2] Centrelink calculated the compensation part of the lump sum as:
$650,000 plus $125,000 less $76,380.78 = $698,619.22 x 50% = $349,309.61.
[2] T8 at page 63 of the T Documents
If this amount is wrong, then it follows that the preclusion period is also wrong.
Mr Morrison has asserted that he did not receive $698,619.22, that he received $60,000 less and that he has no money left[3]. The grounds for seeking review in this Tribunal are simply stated as “no money”. It is apparent that Mr Morrison challenges the figure calculated by Centrelink as the CPLSCP because he disputes receiving $698,619.22.
[3] T8 at page 69 and Application for Review, T1
Whether the figure is correct depends in part on whether Mr Morrison received 1 or more lump sum compensation payment. I do not have direct evidence about this. Legal costs were agreed at $125,000 at the time of the damages settlement. Insurers usually make a single payment to a plaintiff’s solicitor in these circumstances. As such, I find that it is likely that Mr Morrison received a single lump sum payment for the combined total of the damages and costs after deduction of Medicare repayment (if any).
Although Mr Morrison claims that he received $60,000 less, there is no objective evidence to that effect before me. It is quite possible that his solicitors deducted solicitor client costs from the amount received on Mr Morrison’s behalf from what they received from the Insurer. That does not mean he received less than $698,619.22, because a payment of compensation[4] is taken to be received, if another person (in this case Mr Morrison’s solicitors) received it on his behalf.[5]
[4] As defined by section 17(2) of the SS Act
[5] Section 17(5) of SS Act
During the hearing, I asked the Respondent’s counsel to make submissions about whether the sum of $125,000 paid to Mr Morrison for legal costs ought to be included when determining the CPLSCP. In view of the authority of Hulls v SDSS[6], if legal costs are included and paid as a component of a single lump sum compensation payment, they cannot be excluded. This is the case whether or not they are quantified or separately identified in the single lump sum.
[6] [1991] FCA 58 at paragraph 35
As I have concluded that there was a single lump sum payment of compensation on the facts of this case, there was no error in determining the CPLSCP and it was correctly determined to be $698,619.22.
If legal costs are not paid as part of a single compensation payment within the definition of compensation in section 17(2) of the SS Act, but at a later time, I consider the result may be different as section 1171 of the SS Act applies. It deems certain separate payments to be treated as one single lump sum compensation payment for the purpose of determining the compensation part of a lump sum payment. I am not required to decide this issue, but make the following observations.
In section 1171, multiple lumps sums “in relation to the same event that gave rise to an entitlement of the person to compensation“, must be aggregated so that the person is deemed to receive the separate payments together as a single lump sum. It is apparent from the plain interpretation of section 1171, and the intent of the preclusion period provisions as identified by von Doussa J in SDSS v Banks[7], that to be aggregated, the multiple payments must be because of the same compensation event. The meaning of “compensation event” is provided for in section 17(5A) of the SS Act. It provides:
“ For the purposes of subsection (2B) of this section and Part 3.14, the event that gives rise to a person's entitlement to compensationfor a disease, injury or condition is:
(a) if the disease, injury or condition was caused by an accident--the accident; or
(b) in any other case--the disease, injury or condition first becoming apparent;
and is not, for example, the decisionor settlement under which the compensation is payable.”
[7] (1990) FCR 410 at page 424
If the payment for costs is made separately, it cannot in my view be said to be paid in relation to the same event that gave rise to an entitlement to compensation. The event giving rise to the entitlement to compensation is the event provided for in section 17(5A) of the SS Act. That event has particular meaning, being an accident that caused the injury, disease or condition or when the injury, disease or condition for which compensation is paid becomes apparent. Legal costs when paid separately to a person such as Mr Morrison, are not paid because of the accident or event in which injury is suffered. Rather, they are paid in my view because of the successful outcome of his/her proceedings for compensation relating to such injury. That is quite different to the event of accident or injury which is the event that gave rise to the entitlement to compensation. There is in my view a distinction between the event creating the entitlement to compensation and the event causing recovery of costs.
My view seems to conflict with the reasoning of Downes J in Fuller v SDFCS.[8] His Honour said that the fact that costs are paid in relation to a matter did not preclude them from being paid in relation to a second matter. While I agree with that as a general proposition, I cannot agree with the conclusion that legal costs paid separately, arise from the same event because they are only incurred because the accident occurred.
[8] [2004] AATA 615
If the interpretation given by His Honour is correct, then the words “and is not, for example the decision or settlement under which the compensation is payable” are effectively ignored and given no function or purpose when interpreting section 17(5A). This cannot be so, as it is a well established principle of statutory interpretation that words appearing in a legislative provision must be given a meaning.[9] The reasons of Downes J, did not address the concluding words of section 17(5A), which are those that I have emphasised and form the basis of the view I have expressed. When those words are considered and given a meaning, it requires in my view that legal costs paid as a separate payment to the lump sum compensation be excluded because:
i.legal costs may or may not be payable following an event giving rise to an entitlement to compensation;
ii.if payable are only payable if there is agreement to pay or order of a Court or Tribunal to pay, which is distinct from the event within the meaning of section 17(5A);
iii.the type and quantum of costs to be paid by order or agreement are extremely variable and not determined by the event provided for in section 17(5A)..
[9] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 at paragraphs 69 to 71, especially 71
The views I have expressed do not offend the intent or words of the compensation recovery provisions. Further, they produce a more logical and fair result as, it overcomes the “troubling anomaly of the administration” of the recovery provisions, that was the subject of Justice Downes’ reasons for decision in Fuller v SDFCS.[10]
[10] [2004] AATA 615
ARE THERE SPECIAL CIRCUMSTANCES?
What constitutes special circumstance has been the subject of many authorities and principles of law have emerged which include the following:
(a)It is impossible to set out an exhaustive list of factors and circumstances that constitute “special circumstances”[11].
(b)That the case be markedly different to the usual run of cases in some relevant respect.[12]
(c)The concept of “special circumstances” may include financial hardship, but it must go beyond “straitened”, and be exceptional[13].
(d)Failure or delay in being advised by Centrelink of the preclusion period.[14]
(e)In appropriate cases, the amount paid from the lump sum for legal costs may be a special circumstance.[15]
[11] SDSS v Hulls [1991] FCA 51 at paragraphs 39 to 41
[12] Beadle (1985)60 ALR 225
[13] Martin and SDSS [1990] AATA 768
[14] SDSS v Gardiner [1991]
[15] Fuller v SDFCS [2004] and Barrington v SDEWR [2005] AATA 1050 affirmed in SDEWR v Barrington [2006] FCA 527
Very little evidence was before me about how Mr Morrison spent over $650,000. There is evidence that he bought a house ($280,000 - $290,000), bought furnishings, bought a car and repaid his ex-wife money claimed to have been borrowed from her.[16] Prior to the hearing, Mr Morrison was invited to produce documents identifying what he expended and how, but he did not do so. The evidence is that since 29.10.2013, he has had full-time care of his child Ruby and receives family tax benefit of around $280 per fortnight. He still suffers from the injuries that were the subject of the settlement in 2007, but there is limited evidence about this.[17]
[16] Evidence given to SSAT at page 6 of T Documents
[17] Page 7 of the T Documents, evidence given to SSAT
Mr Morrison’s evidence before the SSAT is that he had expended in the region of $450,000 of the lump sum settlement by around mid 2008. He has not accounted in any persuasive way for that or the balance of his settlement sum. Although he told the SSAT in January 2014 that he had no money left and was considering selling his house, there was no evidence that he had done so by the time of the hearing before me.
Mr Morrison was informed of the preclusion period from shortly after his settlement in September 2007. The purchase of a house for a modest sum, if necessary due to health and medical conditions and where there is explanation for expenditure of the balance of the settlement on necessary and reasonable costs, might warrant finding “special circumstances”.[18]
[18] See Barrington v SDEWR cited above
The party/party costs of $125,000 represent about 18% of the total sum identified as the lump sum compensation payment. It is likely the costs actually paid were higher because solicitor client costs charged are almost always more than party/party costs. I do not know how much Mr Morrison actually paid for solicitor client costs as he did not produce documentation about that from his solicitors.
Taking all the evidence and relevant factors into account, I am persuaded to exercise the discretion available in section 1184K favourably for the reasons that:
(a)Legal costs represented a sizeable proportion of the lump sum compensation payment;
(b)Mr Morrison now has full time care of his child and has additional expenses he may not have initially foreseen after settlement;
(c)There is apparent unfairness to compensation recipients whose costs are paid as part of a single lump sum as compared to those who separately receive costs; and
(d)There is an anomaly to which Downes J refers to in Fuller v SDSS, which is highly undesirable and contrary to good policy and legislation.
The sum of $50,000 of the total of $775,000 lump sum payment should be disregarded for the purpose of calculation of the compensation part of the lump sum. The sum of $76,380.78 must also be disregarded as already determined by Centrelink in its decision. In arriving at this conclusion, I have been mindful of what Einfeld J said in SDSS vThompson[19]:
“Intuitive justice will often be as fair a criterion and as faithful to the legislative intention as any other approach.”
[19] [1994] FCA 1477
CONCLUSION
The application is allowed and the matter remitted to the Respondent to give effect to the above conclusion. For clarity, that means that $50,000 and $76,380.78 are to be disregarded from the total of $775,000, before multiplication by 50% as required by section 17 (4) of the SS Act.
I certify that the preceding 27 (twenty-seven) paragraphs are a true copy of the reasons for the decision herein of Ms S Taglieri (Member) ........................................................................
Administrative Assistant
Dated
Date(s) of hearing 3 September 2014 and 9 September 2014 Applicant In person Solicitors for the Respondent Mr Brian Sparkes, Program Litigation and Review Branch
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