McLeod and Secretary, Department of Social Services (Social services second review)
[2016] AATA 853
•28 October 2016
McLeod and Secretary, Department of Social Services (Social services second review) [2016] AATA 853 (28 October 2016)
Division
GENERAL DIVISION
File Number(s)
2016/1660
Re
Wendy McLeod
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
Decision
Tribunal Mr S. Webb, Member
Date 28 October 2016 Place Canberra The decision under review is set aside. Ms McLeod is not precluded from payment of Age Pension as of 2 June 2015. The application is remitted to the Secretary to determine Ms McLeod’s Age Pension entitlements.
............[sgd]............................................................
Mr S. Webb, Member
Catchwords
SOCIAL SECURITY – age pension – compensation – meaning of ‘lump sum payment’, ‘lump sum compensation payment’ and ‘arrears of periodic compensation payments’ – lump sum compensation payment does not include a payment of arrears of periodic compensation payments – no lump sum compensation payment –no lump sum preclusion period barring payment of a compensation affected payment – decision set aside
Legislation
Age Discrimination Act 2004, ss 31, 41
Social Security Act 1991, ss 17, 23(5D), 1164, 1169, 1170, 1171, 1184K
Workers Compensation Act 1987 (NSW), ss 66, 67, 151G, pt 3CASES
Blunn v Cleaver [1993] FCA 576
Fuller and Secretary, Department of Family and Community Services [2004] AATA 615
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576
REASONS FOR DECISION
Mr S. Webb, Member
28 October 2016
Wendy McLeod was injured in employment. She claimed and was paid compensation. Shortly before reaching pension age, she claimed Age Pension. A delegate of the Secretary rejected her claim on grounds that a compensation lump sum preclusion period applied. Ms McLeod pressed her rights of review in respect of this decision, thus far without success. She applied for further review by the Tribunal.
The facts
On 4 September 2011, Ms McLeod stopped work on grounds of psychological injury in the form of Post-Traumatic Stress Disorder (the injury). At the time, she was employed by the NSW Department of Family and Community Services as a child protection case worker. The background circumstances to Ms McLeod’s injury are set out in a NSW Workers Compensation Commission Medical Assessment Certificate dated 23 July 2013.[1] It is not necessary to recount these circumstances for present purposes. It is sufficient to observe that her employer’s insurer, QBE Insurance, accepted liability to pay compensation for Ms McLeod’s injury with the date of injury being 14 September 2011. Ms McLeod has not worked since that date.
[1] T6.
Ms McLeod says that she was paid full wages for a period, whereupon, thereafter, her weekly payments were reduced very significantly to approximately $406 per week.[2] I understand that by this she means that she was paid periodic compensation payments for injury-related incapacity under Division 2 of Part 3 of the Workers Compensation Act 1987 (NSW) (the NSW Act).
[2] See T19 folio 76, T29 folio 144 and T32 folio 157.
In or about September 2013, Ms McLeod was paid two lump sum payments of compensation in respect of the injury - $46,750 in respect of a 26 percent whole person impairment under s 66 of the NSW Act, and $20,000 in respect of pain and suffering under s 67 of that Act.[3] I understand that these amounts were paid to lawyers representing her in the compensation claim against QBE Insurance and the amounts subsequently paid to Ms McLeod were net of deductible expenses.[4]
[3] T13 folio 58 refers; see also T40 folio 173.
[4] See T29 folio 143.
In 2015, lawyers acting for Ms McLeod pursued a further claim for work injury damages arising in respect of the injury. The claim was settled by agreement. Ms McLeod entered into a Work Injury Damages Deed of Release (the Deed) with effect from 10 March 2015.[5]
[5] T13.
The Deed recites Ms McLeod’s claim, the employer’s response and the parties’ agreement to settle in the following terms –
“6. As a result of the injuries and alleged disabilities, the claimant alleges she has sustained past and future economic loss, including the past and future loss of superannuation, past and future employment entitlements, Fox v Wood, and claims work injury damages.
7. The employer denies it breached its duty of care to the claimant and denies all allegations of negligence, breach of statutory duty and breach of codes of practice, and the entirety of the claimant’s claim.
8. Without admission of liability and on the basis of the terms set out in the operative provisions below, the parties agree to settle all actual or potential claims for work injury damages referred to in these recitals ensuing from the allegations made by the claimant.”[6]
[6] T13 folio 58.
The Operative Provisions of the Deed provide at paragraph 1 for payment to Ms McLeod of work injury damages in the amount of $135,000. This amount was inclusive of costs but clear of previous compensation payments made to her. The payment was said to be “in full and final satisfaction of any entitlement or claim which the claimant may have in relation to the allegations”. Paragraph 2 provides for an additional payment of “weekly compensation up to the date the cheque for work injury damages is drawn”.[7]
[7] T13 folio 59.
On 17 March 2015, QBE Insurance sought clearance of any recovery by Centrelink.[8] On 23 March 2015, Centrelink advised nil recovery.[9] On the same day, Centrelink informed Ms McLeod that, on account of the lump sum compensation payment, a lump sum preclusion period would apply from 13 March 2015 to 30 March 2017.[10] Centrelink sent a further letter in similar terms to Ms McLeod on 22 April 2015, requesting acknowledgement.[11]
[8] T15 folio 66.
[9] T16.
[10] T17.
[11] T18.
On 27 April 2015, Ms McLeod replied to Centrelink, stating –
“The sum I am due to receive at some time in the coming months is actually $93,500 and is strictly ONLY re-imbursement of wages lost during the more than three years of disability up until 2015 (NOT compensation). It will be paid under s 151G of the NSW Workers Compensation Act 1987 regarding Common Law claims for employer negligence…”[12]
“… the Law firm representing me lodged a Common Law claim on my behalf for unpaid wages …
In March this year, the Barrister representing my case calculated the wages I had lost due to inability to recover [from the injury] … was between $125,000 and $165,000 (approximately).
A payment of $135,000 was offered by QBE under section 151G of the Workers Compensation Act 1987, and accepted by me on 13 March 2015, based ONLY on unpaid wages over the four years of illness.
Of this total figure of $135,000 I will receive only about $93,500 because the Law Firm and Barrister have stated they will deduct approximately $41,500 for their own costs, fees and charges from my unpaid wages before passing the remainder on to me.
Hence, I am due at some time in the future to receive only $93,500 – reimbursement for my own missing wages.”[13]
[Original emphasis]
[12] T19 folio 75.
[13] T19 folio 77.
In the result, on 21 May 2015, Ms McLeod’s lawyers notified her that she would be paid $80,003.89, net of costs, disbursements and deductions.[14]
[14] T23 folio 118.
It appears that the work injury damages payment of $135,000 was drawn on or about 30 April 2015.[15] Weekly payments of compensation to Ms McLeod ended on that date.[16]
[15] T40 folio 175.
[16] T42 folio 177.
On 8 May 2015, Ms McLeod lodged a claim for Age Pension.[17] Under s 23(5D) of the Social Security Act 1991 (the Social Security Act), Ms McLeod reached pension age on 2 June 2015.
[17] T21 and T22.
On 22 June 2015, a delegate of the Secretary determined to reject the claim.[18]
[18] T27.
On 7 July 2015, Ms McLeod sought reconsideration of this decision, reiterating that the recent lump sum payment of $135,000 was in respect of “past financial losses”.[19]
[19] T29 folios 143 and 144.
On 3 August 2015, an Authorised Review Officer decided to vary the determination rejecting Ms McLeod’s Age Pension claim on grounds that the preclusion period applied from 1 May 2015 to 18 May 2017.[20]
[20] T30.
On 16 March 2016, the Social Services and Child Support Division of the Tribunal decided to affirm the decision rejecting Ms McLeod’s claim for Age Pension on grounds of a compensation preclusion period running from 1 May 2015 to 18 May 2017.[21]
[21] T2.
On 20 April 2016, Ms McLeod applied for further review.
Issues
Two key questions arise for determination –
(a)Is Ms McLeod subject to a compensation lump sum preclusion period during which she cannot be paid Age Pension?
(b)And if so, do special circumstances exist that render it appropriate to treat all or part of the lump sum compensation she obtained as not having been paid?
Ms McLeod also argued that the compensation recovery provisions cannot be applied on grounds of age discrimination contrary to s 31 of the Age Discrimination Act 2004 (the Age Discrimination Act). The Secretary rejects this proposition. It is not necessary to address these matters in any depth. The operative issues Ms McLeod has raised are squarely addressed by operation of s 41 of that Act in respect of the Social Security Act.
Does a compensation lump sum preclusion period apply?
Ms McLeod disputes that the compensation recovery provisions of the Social Security Act apply in the particular circumstances of her case. She argues that the $135,000 lump sum she received was only paid in respect of past lost earnings, with no component for future financial or economic loss. The Deed setting out terms on which she settled her compensation claim is subject to the NSW Act which precludes, so the argument goes, compensation in consideration of lost earning capacity once pension age is reached. She asserts that, as settlement negotiations were finalised on 13 March 2015, only a few weeks before she reached pension age, it was agreed that in addition to the lump sum payment of past lost earnings, weekly payments of compensation would be made from the date of the settlement to the date on which the agreed lump sum payment was drawn. In Ms McLeod’s submission, the lump sum payment was calculated only in respect of past lost earnings and for this reason it is not a lump sum compensation payment and she is not precluded from payment of Age Pension.
The Secretary does not agree and maintains that the compensation recovery provisions in Part 3.14 of the Social Security Act apply. The reason for this is said to be that the compensation settlement Ms McLeod entered into was in relation to past and future economic losses. In the Secretary’s submission, it does not matter that the future loss component might be small, if provision is made for payment of compensation in relation to a claim for future economic loss, the compensation recovery provisions apply and a compensation lump sum preclusion period will arise during which Age Pension is not payable.
In the Secretary’s submission, the lump sum preclusion period commences on 1 May 2015 and ends on 18 May 2017.
In order to address these submissions, it is necessary to consider the interlinked provisions of the Social Security Act. The word ‘compensation’ is given meaning in s 17(2) –
(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.
Section 1169 bars payment of a ‘compensation affected payment’ to a person who receives a ‘lump sum compensation payment’ –
1169 Compensation affected payment not payable during lump sum preclusion period
(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.
(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.
If s 1169 applies on the particular facts, the duration of the lump sum preclusion period is to be worked out under s 1170, applying the ‘compensation part of a lump sum compensation payment’ calculated under s 17(3) –
Compensation part of a lump sum
(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.
The term ‘compensation affected payment’ is given meaning under s 17(1), and it includes Age Pension.
The steps to be taken in a case of this kind were discussed by Downes J, then President of the Tribunal, in Fuller and Secretary, Department of Family and Community Services[22] -
[22] [2004] AATA 615.
6.
The Act requires the following sequential issues to be resolved:
(i) Has the applicant received or claimed a compensation affected payment (par 1169(1)(a))?
(ii) Has the applicant received a lump sum compensation payment (par 1169(1)(b))?
(iii) Alternatively to (ii), is the applicant deemed to have received one lump sum compensation payment (subs 1171(1))?
(iv) If yes to (i) and either (ii) or (iii), what is the compensation part of the lump sum compensation payment (subs 17(3))?
(v) What preclusion period is derived from applying the sum representing the lump sum compensation payment to the formula prescribed in s 1170?
Has the applicant received or claimed a compensation affected payment?
The answer to this question is Yes.
Quite clearly, on the facts of Ms McLeod’s case, s 1169(1)(a) is satisfied.
Has the applicant received a lump sum compensation payment?
This is not an easy question to answer.
Under s 1169(2) a ‘lump sum compensation payment’, does not include a ‘lump sum payment’ ‘to which s 1164 applies’ or that ‘relates only to arrears of periodic compensation payments’.
The terms ‘lump sum compensation payment’, ‘lump sum payment’ and ‘periodic compensation payments’ are not defined.
The word ‘compensation’ is defined, and this assists a correct interpretation of ‘lump sum compensation payment’. At paragraph 11 in Fuller’s case, Downes J said –
“An important consideration is what is the meaning of compensation in the phrase "lump sum compensation payment". Applying the relevant definition in par 17(2)(c), which is accepted by both parties to be applicable, the phrase becomes "lump sum payment ... in settlement of a claim for damages ... that is made wholly or partly in respect of lost earnings or lost capacity to earn ..." Once a component is included in the lump sum it does not matter whether it relates to non economic loss compensation, to costs, or to anything else. It is its quality as part of the lump sum not how it is characterised which matters. All that is required is that part of the sum relates to economic loss.”
There is an important exclusion to a ‘lump sum compensation payment’ however. This is set out in s 17(4A) –
(4A) For the purposes of this Act, a payment of arrears of periodic compensation payments is not a lump sum compensation payment.
It is now well established by authority,[23] that this exclusion should not be misconstrued as applying to a disaggregated component of a lump sum payment. If a lump sum payment is solely comprised of arrears of periodic compensation payments to which the person is entitled in a period, it will not be treated as a ‘lump sum compensation payment’ for the purposes of the Social Security Act.
[23] Secretary, Department of Social Security v Cunneen [1997] FCA 1033; (1997) 78 FCR 576.
The term ‘periodic compensation payments’ is not defined. It can readily be understood if the words are given their ordinary meanings. It refers to compensation payments that are periodic, that is, payments that are characterised by regular or intermittent recurrence. Payments of this kind commonly arise in respect of incapacity for work as a result of injury. The phrase ‘arrears of periodic compensation payments’ refers to periodic compensation payments in retrospect that are behind, outstanding or due, or as Foster J said in Secretary, Department of Social Security v Cunneen[24] – “simply a total of previously unpaid periodic payments”.[25]
[24] Ibid.
[25] Ibid, at FCR 581.
At this point it is important to observe that it is not the nature of the payment or the manner in which it is made that is determinative, rather it is the entitlement to the compensation that must be considered.[26] If it is established that a person is entitled to weekly amounts of compensation in a past period, and the entitlement is met by payment of the sum of those amounts in a lump sum, the weekly amounts thus paid do not lose their character as periodic compensation payments and the lump sum payment may properly be characterised as arrears of periodic compensation payments.
[26] Blunn v Cleaver [1993] FCA 576 at [42].
In this regard, there is a question whether work injury damages in respect of past lost earnings during a period are properly treated as unpaid periodic compensation payments to which Ms McLeod is entitled under the terms of settlement set out in the Deed.
When considering a question of this kind under a previous iteration of the Social Security Act, the Full Court in Blunn v Cleaver[27]discussed the introduction of s 17(4A) in 1992 and had this to say -
[27] Ibid.
34. 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. This approach spreads the
arrears of periodic payments over the period in question with the
intent being that the result on the person would be similar had
they in fact received the payments on a periodic basis. This
amendment will prevent such 'lump sum' payments being regarded as
income only in the week or fortnight in which the sum was actually
received; a treatment which distorts the true nature of the
arrears payment."
If the true character of a damages payment in settlement of a claim is established by probative evidence to be wholly comprised of weekly amounts of compensation to which the person is entitled in respect of a past period, then I think it can be accepted that the payment may be treated as ‘arrears of periodic compensation payments’ for the purposes of the Act.
At this point it is helpful to consider the terms of s 17(3) of the Social Security Act, as s 17(3)(ab) expressly includes ‘part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in a lump sum’ where ‘the entitlement to the periodic compensation payments arose from the settlement…’ and s 17(3)(b) includes ‘so much of the payment as is … in respect of lost earnings or lost capacity to earn, or both’. These provisions apply in respect of a ‘lump sum compensation payment’ which, by operation of s 17(4A) does not include payment of arrears of periodic compensation payments. The policy and purpose of these provisions is to avoid manipulation of compensation lump sum payments on settlement of claims, and to address disputation about economic loss components of such settlements and the mischief of double dipping in respect of compensation affected payments from the public purse. The exclusion of payment of arrears of periodic compensation payments by operation of s 17(4A) does not neuter the effect or the purposes of s 17(3)(ab) and (b), as those provisions continue to apply to amounts of periodic compensation payments and lost earnings and lost capacity to earn that are not exclusively paid in arrears.
The term ‘lump sum payment’ can be understood by its ordinary meaning in common usage. It refers to a payment that is comprised of a number of items, where the sum is derived by adding or taking together amounts into an aggregate whole.[28] Periodic compensation payments made on a weekly basis, for example, would not be considered to be a ‘lump sum payment’, whereas payment of periodic compensation in arrears or on redemption, for example, perhaps with other amounts of compensation, where the amounts are aggregated into a single sum, would be considered to be a ‘lump sum payment’.
[28] Fuller and Secretary, Department of Family and Community Services [2004] AATA 615 at [21]-[22].
Section 1164 is in the following terms –
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).
The present materials do not establish that any of the three lump sum payments Ms McLeod received are within the terms of this section.
As I understand the evidence, Ms McLeod was paid periodic compensation payments from the date of her injury, 14 September 2011, in accordance with entitlements calculated under Division 2, Part 3 of the NSW Act. The lump sum payments she was paid were in addition to the periodic payments she received by way of such weekly compensation entitlements. The two lump sum payments that were made in or about September 2013 were in respect of impairment, pain and suffering under ss 66 and 67 of the NSW Act. The work injury damages amount of $135,000 was paid under the common law provisions in Part 5 of the NSW Act. As I understand the evidence, there was no cause for Ms McLeod to repay previous amounts of periodic compensation she had received under the NSW Act, as the lump sum amount of $135,000 was in addition to those previous payments, being the difference between the periodic compensation she was paid and the amount of earnings she would otherwise have been paid in employment, absent injury.
None of these lump sum payments can properly be characterised as a conversion of an entitlement to periodic compensation payments. For this reason, s 1164 of the Social Security Act does not apply.
Is the applicant deemed to have received one lump sum compensation payment?
At this point, it is appropriate to determine whether s 1171 may apply –
1171 Deemed lump sum payment arising from separate payments
(1) If:
(a) a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and
(b) at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act and the Administration Act:
(c) the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;
(d) the single payment is taken to have been received by the person:
(i) on the day on which he or she received the last of the multiple payments; or
(ii) if the multiple payments were all received on the same day, on that day.
(2) A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.
As the $135,000 lump sum payment in April 2015 was in respect of past lost earnings, s 1171(1)(b) is satisfied. With regard to s 1171(1)(a), however, there is a question whether the lump sum payment is within the exclusion provided for in s 1171(2) on grounds that ‘it relates exclusively to arrears of periodic compensation’, as Ms McLeod contends.
For the purposes of s 1171(2), it is the whole of a ‘lump sum payment’ that must relate ‘exclusively’ to arrears of periodic compensation, not some part or component of the lump sum payment.
Arrears of periodic compensation payments
Thus, presently, three questions of a similar character arise under the legislation in respect of the $135,000 lump sum payment Ms McLeod received in 2015 –
(a)Is the lump sum ‘arrears of periodic compensation payments’ and not a lump sum compensation payment by operation of s 17(4A)?
(b)Does the lump sum relate only to arrears of periodic compensation payments for the purposes of the exclusion in s 1169(2)(b)?
(c)Does the lump sum relate exclusively to arrears of periodic compensation payments for the purposes of the exclusion in s 1171(2)?
In order to determine the answers to these questions, it is necessary to carefully consider the terms of the Deed by which Ms McLeod’s claims were settled. There are a number of things to say about this document.
The Deed
Paragraph 6 of the Recitals in the Deed expressly provides that Ms McLeod’s claims relate to past and future economic losses. Paragraph 7 of the Recitals expressly provides that the employer denies the entirety of Ms McLeod’s claims. The employer’s rejection of liability is reiterated in paragraph 8 of the Recitals and paragraph 13 of the Operative Provisions. Paragraph 8 of the Recitals provides that the parties agree to settle ‘all actual and potential claims for work injury damages’ on the basis of terms set out in the Operative Provisions.
Paragraph 1 of the Operative Provisions provides for a lump sum payment of injury damages in the amount of $135,000, subject to Ms McLeod agreeing to the matters set out in paragraphs 1(a) to (e). These conditions include releasing the employer ‘from all claims of any nature arising out of or in connection with the allegations’, not making any further claims against the employer, resigning her employment and accepting that the payment is in ‘full and final satisfaction of any entitlement or claim’ she may have in relation to the ‘allegations’.
Paragraph 2 of the Operative Provisions expressly provides for prospective payment of weekly compensation ‘in addition to’ the lump sum payment of $135,000 for ‘work injury damages’. The weekly compensation payments are provided from the date of execution of the Deed, 10 March 2015, up to the date on which the cheque for payment of the lump sum work injury damages is drawn.
The Deed is made subject to the NSW Act. Under s 151G of that Act, the work injury damages it specifies are confined to past and future economic losses calculated in accordance with and subject to ss 151I, 151IA and 151J, as well as other relevant provisions in Part 5.
Ms McLeod maintains that the amount of the lump sum payment for work injury damages under paragraph 1 of the Operative Provisions was calculated in respect of past lost earnings alone.[29] She maintains that by this method a final sum was negotiated and agreed upon between the parties in settlement of her claim for payment of past lost wages. Her evidence on this point, scant as it is in the documents she has provided, was not tested or challenged. It is not contra-indicated by other evidence, and I accept it.
[29] T32 folios 157 to 158.
As I understand Ms McLeod’s submissions, paragraph 2 of the Operative Provisions, alone, made allowance for future lost earnings.
The Secretary does not accept that this is so, arguing that the lump sum payment in paragraph 1 relates to future lost earning capacity in some degree, as well as to other claims set out in paragraph 6 of the Recitals.
While there is some force to the Secretary’s arguments on this point, careful examination of the Deed and the present evidence suggests a different conclusion.
Section 151IA precludes consideration of the person’s lost capacity to earn once ‘pension age’ as defined in the Social Security Act is reached. In Ms McLeod’s case s 23(5D) of the Social Security Act applies, such that her ‘pension age’ is 65. For this reason, the Deed could not make provision for payment of future economic loss in respect of lost earning capacity after Ms McLeod reached the age of 65 on 2 June 2015. It follows that the scope of weekly compensation payments provided under paragraph 2 of the Operative Provisions is limited to the period from execution of the Deed to Ms McLeod reaching pension age on 2 June 2015.
When the Deed was executed on 10 March 2015, the date on which the work injury damages lump sum payment cheque would be drawn, thereby triggering cessation of weekly compensation payments, may have been predicted but it could not have been ascertained with certainty. It is probable that the date on which Ms McLeod would reach ‘pension age’ was known and the limit of the prospective weekly compensation payments, by operation of s 151IA of the NSW Act, would have been clear enough to the legal representatives of the parties to the Deed. It may be inferred that the Deed was drafted and agreed with these considerations in mind, such that uncertainty about the trigger for cessation of weekly payments was capped and not left open.
This construction of paragraph 2 of the Operative Provisions is consistent with Ms McLeod’s account of what occurred – the lump sum payment under paragraph 1 of the Operative Provisions was calculated in respect of past lost earnings and paragraph 2 was in respect of future weekly compensation payments.
The Deed provision for prospective periodic compensation payments in the period from execution of the Deed to the date on which the lump sum payment cheque is drawn or, impliedly, Ms McLeod attaining pension age on 2 June 2015, which ever occurred first, does not sit comfortably or well with the Secretary’s assertion that the lump sum amount specified in paragraph 1 of the Operative Provisions includes a component for future economic loss. If that was so, the provision of prospective weekly compensation payments under paragraph 2 would amount to double counting, or double dipping. I do not think the Deed is properly construed in that manner. Furthermore, paragraph 2 expressly states that the weekly payments are ‘in addition to’ the lump sum provided under paragraph 1. This clearly distinguishes the prospective periodic compensation payments, which could have continued until 2 June 2015, from the lump sum payment of $135,000.
The Payment Summary QBE Insurance issued in respect of the periodic payments made under paragraph 2 of the Operative Provisions in the Deed clearly reveals that tax was deducted from the payments made to Ms McLeod in the usual way.[30] Even though there are no documents relating to payment of superannuation obligations by QBE or the employer in respect of these periodic payments, it may be inferred that such obligations were met.
[30] T41 folio 176.
The present materials do not include documents specifying the actual claims made by Ms McLeod in respect of the injury as of 10 March 2015. Ms McLeod asserts that the only actual claims made in 2015 were in respect of lost earnings. Paragraph 6 of the Recitals in the Deed is cast in broader terms, however.
In the absence of any other ‘actual’ claims, it is conceivable, that the lump sum payment might relate to ‘potential’ claims that Ms McLeod might bring in respect of the injury. The difficulty with this proposition is that the Deed expressly precludes Ms McLeod from bringing any further claims against the employer in respect of the injury and there is no evidence that any amount was included in the $135,000 payment for this purpose.
It may be argued that the lump sum payment relates to Ms McLeod’s agreement to forego any potential future claims against her former employer in respect of the injury. The terms of the Deed are sufficiently broad to allow for this possibility. It may be accepted, and it is not surprising at all, that the terms of agreement reached in settlement of Ms McLeod’s claim are broadly cast, but it does not follow, and it cannot be assumed for present purposes, that the quantification of work injury damages included an amount for or in lieu of potential claims, or unidentified amounts, or undisclosed entitlements, or rights foregone by Ms McLeod in releasing her former employer from further claims, when the documents before the Tribunal clearly point to the quantification being conducted on calculation of her past lost earnings in the period from 14 September 2011 to 10 March 2015.
Certainly, by operation of paragraphs 1(a) to (e) of the Operative Provisions, the lump sum payment is ‘in full and final satisfaction of any entitlement or claim which the claimant may have in relation to the allegations’. Ms McLeod’s unchallenged evidence is that the only claim made by her legal representatives in 2015 related to compensation for past lost wages. Even if paragraph 6 of the Recitals is used as a guide to her claims for work injury damages, it is not presently established that the lump sum referred to in paragraph 1 of the Operative Provisions in the Deed includes any amount other than her claim for past lost earnings. It may be accepted that Ms McLeod agreed to provisions protecting the employer from potential future claims, as yet unmade, in order to reach settlement of the actual claim she made, but this does not change the composition of the lump sum specified in paragraph 1 of the Operative Provisions in the Deed.
Insofar as the Secretary argues that the lump sum is in settlement of all actual and potential claims by Ms McLeod in respect of the injury, the present evidence is sufficient to establish that the parties agreed to settle Ms McLeod’s claim in respect of lost earnings in a comprehensive and final manner. It is on this basis that the payments provided for in paragraphs 1 and 2 of the Operative Provisions were agreed. But it does not follow, and the present evidence does not establish, that the sum provided for in paragraph 1 includes any amount other than arrears of periodic compensation payments on which basis it was calculated. It is quite plain that settlement was reached on the basis that Ms McLeod’s claim for past and future lost earnings would be met. And that is what paragraphs 1 and 2 of the Operative Provisions achieve.
It is not necessary to go behind the terms agreed and set out in the Deed in search of disaggregate components of a lump sum payment, contrary to authority. On the present evidence, even though the $135,000 lump sum payment served the purposes of the parties to the Deed in reaching a comprehensive settlement agreement on other matters, the lump sum is comprised of one component, alone – past lost earnings.
This is not a case where other components have been added together to produce a lump sum in settlement of outstanding claims. And it is not a case in which a potential future claim of economic loss might arise outside the terms of the Deed and the framework of the NSW Act. By operation of paragraph 7 of the Recitals in the Deed, the employer has denied the entirety of Ms McLeod’s claims as set out in paragraph 6 of the Recitals, and by operation of paragraph 8 of the Recitals and paragraph 13 of the Operative Provisions, the employer has denied liability for such claims.
I must determine this issue on the balance of the present evidence, properly construing and applying the legislation.
The present evidence is sufficient to establish that Ms McLeod claimed and was paid work injury damages from her employer in respect of economic losses, past and future. Her claim was settled by consent, without judgement, and without acceptance or admission of liability by the employer, such that –
(a)she would be paid a lump sum amount, calculated in respect of previous lost earnings; and
(b)she would be paid periodic compensation amounts, prospectively, until the date the lump sum payment cheque was drawn or when she reached pension age on 2 June 2015, whichever occurred first; and
(c)she would release the employer from all claims, including potential claims in the future, in respect of the injury.
Is the lump sum ‘arrears of periodic compensation payments’ and not a lump sum compensation payment by operation of s 17(4A)?
The answer to this question is Yes.
As the lump sum amount was calculated in respect of Ms McLeod’s lost earnings resulting from the injury in the period from 14 September 2011 to 10 March 2015, net of periodic compensation previously paid under the NSW Act prior to execution of the Deed and without inclusion of any other amount, the lump sum payment may properly be understood as a payment of ‘arrears of periodic compensation payments’.
For the purposes of s 17(4A), I am satisfied that the lump sum payment of work injury damages specified in paragraph 1 of the Operative Provisions of the Deed is within the meaning of ‘arrears of periodic compensation payments’. That is the manner in which it was calculated, and that is the claim it meets. It does not include any amount for future economic losses under the Deed and it is not established that any amount was included in the lump sum in relation to any other actual or potential claim by Ms McLeod. It is a lump sum payment of arrears of periodic compensation payments, alone.
The entitlement arose from the terms of settlement set out in the Deed in respect of s 151G of the NSW Act. The payment of $135,000 was a lump sum payment of lost wages in respect of a past period from 14 September 2011 to 10 March 2015. To my mind, this payment is properly understood as payment of ‘arrears of periodic compensation payments’.
There is a long line of established authority addressing the policy underlying the compensation-related provisions of the Social Security Act,[31] and the policy is well understood. In this case, however, when the legislation is applied to the particular facts, the result is quite clear.
[31] See Secretary, Department of Social Security v Banks (1990) 23 FCR 416, Secretary, Department of Social Security v Cunneen [1997] FCA 1033, Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 and Clark v Secretary, Department of Employment and Workplaces Relations [2007] FCA 1076, for example.
The broad meaning of ‘compensation’ embraces the lump sum payments Ms McLeod received, but the narrow exclusion in s 17(4A) applies such that the $135,000 lump sum payment is not a ‘lump sum compensation payment’ for the purposes of the Social Security Act.
Does the lump sum relate only to arrears of periodic compensation payments for the purposes of the exclusion in s 1169(2)(b)?
The remaining questions posed are whether the lump sum payment ‘relates only’ or ‘relates exclusively’ to arrears of periodic compensation, and not to something else, as well. These terms are in some regards synonymous; they refer to a singular relationship between a lump sum payment and arrears of periodic compensation, such that the lump sum payment relates solely to periodic compensation arrears and nothing else. The extent of any intended difference of meaning between the two terms must be considered in the context and purposes of the sections in which they lie – s 1169 and s 1171. The word ‘relates’ has very broad scope in consideration of the essential connection or relationship between two elements.
To my mind, it may be accepted that the lump sum payment calculated on the basis of past lost earnings ‘relates’ generally to settlement of Ms McLeod’s claim - it is but one element of the Deed struck for that purpose. But the exclusion in s 1169(2)(b) does not have such a general character. For it to be enlivened, it must be established by evidence that the lump sum payment ‘relates only’ to arrears of periodic compensation payments. The relativity is in respect of the content of the payment, not the purposes to which it may be put. And considered in that frame, I am satisfied that the content of the $135,000 lump sum ‘relates only’ to past lost earnings such that, as I have found, the payment is arrears of periodic compensation payments.
It will be clear by now that I am persuaded that the lump sum payment is within the terms of s 1169(2)(b), such that it is not within the meaning of a ‘lump sum compensation payment’ received by Ms McLeod for the purposes of s 1169(1)(b) – the lump sum payment relates only to arrears of periodic compensation payments. This is consistent with the finding I have made under s 17(4A).
Does the lump sum relate exclusively to arrears of periodic compensation payments for the purposes of the exclusion in s 1171(2)?
For the purposes of s 1171(2), when the provisions of the Deed are properly understood with reference to the NSW Act, I am satisfied that the lump sum payment ‘relates exclusively’ to arrears of periodic compensation payments. The exclusive nature of relationship that must be established between the lump sum payment and arrears of periodic compensation is one that does not permit inclusion of any amount, however small, relating to anything other than arrears of periodic compensation in the lump sum payment. That is what the present evidence establishes in this case. For this reason it is excluded from s 1171(1)(a).
I should say again, the essential precondition of the exclusion in s 1171(2) is an exclusive relationship between a lump sum payment and arrears of periodic compensation. This test goes to the essential nature of the lump sum, including all the elements, contents or component parts of which it is made. If the sum includes any amount relating to something other than arrears of periodic compensation, the test is not satisfied and the exclusion is not enlivened. If the contrary holds, and the sum relates exclusively to arrears of periodic compensation, the purposes to which it is put or the way in which it might be employed in service of an agreement to settle outstanding claims does not change its essential nature. That is so in this case.
Thus, lest there be any doubt about this, the lump sum payment of arrears of periodic compensation payments, totalling $135,000 is not taken to be a lump sum payment for the purposes of s 1171(1)(a). Even though Ms McLeod received two earlier lump sum payments that are within the terms of that section, neither one of those two payments was wholly or partly in respect of lost earnings or lost capacity to earn. From this it follows that the three lump sum payments Ms McLeod received cannot be deemed as one lump sum payment by operation of s 1171.
Compensation part of lump sum compensation payment and preclusion period
From this it follows that there is no bar under s 1169, precluding Ms McLeod from being paid a compensation affected payment.
On the facts of Ms McLeod’s case, consistent with the policy underlying the legislation, there is no possibility of double-dipping. Ms McLeod reached pension age on 2 June 2015, after the periodic compensation payments she was receiving ceased on 30 April 2015. It follows that she could not receive, or be deemed to receive, compensation for economic loss and a compensation affected payment, namely Age Pension, in respect of the same period of time.
Even though Ms McLeod received periodic compensation payments until 30 April 2015, these payments are not treated as lump sum payments. Furthermore, the lump sum payments she received in 2013 and 2015 are not within the meaning of ‘lump sum compensation payments’ for the purposes of s 1169.
As the lump sum payments of compensation Ms McLeod received are not within the meaning of a ‘lump sum compensation payment’ the formula for calculating the ‘compensation part of a lump sum compensation payment’ set out in s 17(3) has no application in her case and a preclusion period does not apply under s 1170.
For these reasons, the decision under review must be set aside and the application will be remitted to the Secretary to determine Ms McLeod’s Age Pension entitlements.
Special circumstances
Strictly, it is not necessary to go any further to address issues and submissions made in respect of s 1184K of the Social Security Act. Nonetheless, it is appropriate to make some observations about some of the matters Ms McLeod has raised.
The issue of age discrimination she has raised, in reference to s 31 of the Age Discrimination Act for example, highlights potential unfairness that may flow from application of the compensation provisions of the Social Security Act. These issues of unfairness do not arise on the facts of her case. And, as I understand her submissions, the discriminatory effect she agitates is one of general import, rather than something particular to her – it is alleged discrimination to a cohort of older people that is said to arise from operation of the Social Security Act.
The proposition that discrimination of this kind, even if it was to be established by probative evidence, is a matter this Tribunal is capable of addressing is misguided. The Tribunal is a creature of statute. It is not a court, and it does not exercise power at large. It is bound to exercise jurisdiction conferred upon it by legislation and to apply the law, and in so doing to make the correct or preferable decision.
Furthermore, as I have said, s 41(1) of the Age Discrimination Act stands against the proposition Ms McLeod is contending for – anything done by a person in compliance with the Social Security Act is not made unlawful by operation of Part 4 of the Age Discrimination Act. Matters of the kind Ms McLeod is agitating may be better taken up with the legislature.
Furthermore, and finally, even if unfairness of the kind alleged by Ms McLeod in these proceedings was found to arise from operation of the compensation provisions of the Social Security Act, being unfairness to a cohort of older Australians, the Tribunal is bound by established authority to conclude that unfairness of that kind cannot be ameliorated by resort to the special circumstances provisions in s 1184K of the Social Security Act. There are two reasons for this. Firstly, absent evidence that the alleged unfairness was an unintended consequence of the legislation,[32] the unfairness would be a result of lawful operation of the provisions of the Social Security Act as a matter of policy: Secretary, Department of Family and Community Services v Chamberlain.[33]
[32] Groth v Secretary, Department of Social Security [1995] FCA 1708 at [11] and [12].
[33] [2002] FCA 67.
Secondly, as I understand Ms McLeod’s case, the unfairness she alleges would apply to the cohort she identified. In applying to or arising in respect of a cohort of older Australians, a question would arise whether the alleged unfairness would apply as a ‘special circumstance’, being something that is uncommon, unusual or out of the ordinary, in the circumstances of her case, alone. If she is correct, and there is unfairness to a cohort of older Australians who receive compensation payments shortly before reaching pension age, this may weigh against a finding of special circumstances sufficient to treat all or part of a lump sum compensation payment as not having been received. It is for this reason that consideration should be given to all of her circumstances when making an assessment under s 1184K.
As I have said, it is not necessary for me to make findings about matters of this kind as this application turns on a different point.
Conclusion
Ms McLeod received compensation in relation to the injury. She agreed terms with her former employer in settlement of a claim for common law damages. The terms included a lump sum payment. The lump sum payment was solely comprised of arrears of periodic compensation payments. The lump sum payment is not a ‘lump sum compensation payment’ for the purposes of the Social Security Act.
It follows that payment of Age Pension to Ms McLeod, pursuant to her claim, is not precluded by operation of s 1169 of that Act.
Decision
The decision under review is set aside. Ms McLeod is not precluded from payment of Age Pension as of 2 June 2015. The application is remitted to the Secretary to determine Ms McLeod’s Age Pension entitlements.
I certify that the preceding 100 (one hundred) paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member ............[sgd]............................................................
Associate
Dated 28 October 2016
Date of hearing 14 October 2016 Applicant In person Solicitors for the Respondent Department of Human Services
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