Morrison; Secretary, Department of Education, Employment and Workplace Relations and
[2008] AATA 1017
•12 November 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 1017
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/2079
GENERAL ADMINISTRATIVE DIVISION )
Re SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT & WORKPLACE RELATIONS
Applicant
And JOEL MORRISON
Respondent
DECISION
TribunalJustice Downes, President
The Hon R J Groom, Deputy President
Ms A F Cunningham, Senior Member
Date 12 November 2008
Place Hobart
DecisionThe decision under review is affirmed.
.................[sgd]......................
Garry Downes
President
CATCHWORDS
SOCIAL SECURITY – Youth Allowance – receipt of lump sum compensation payment – preclusion period – payment of hospital and medical expenses directly to service providers – statutory scheme to calculate preclusion period – meaning of “receives” and “lump sum payments” – payments not included for preclusion period
Administrative Appeals Tribunal Act 1975 (Cth) s 37
Social Security Act 1991 (Cth) ss 17(1), 17(2), 17(3), 17(5), 23(1), 540, 1169, 1170, 1171, 1184K
Motor Accidents (Liabilities and Compensation) Act 1973 (Tas) s 27
Allianz Australia Insurance Ltd v Insurance Australia Ltd t/as NRMA Insurance [2006] ACTCA 26
Comcare v Fyfe [1999] FCA 1368
Fuller v Secretary, Department of Family and Community Services (2004) 83 ALD 152
Secretary, Department of Social Security v Banks (1990) 23 FCR 416; 95 ALR 605; 20 ALD 19
Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576; 149 ALR 665; 48 ALD 251
REASONS FOR DECISION
12 November 2008 Justice Downes, President
The Hon R J Groom, Deputy President
Ms A F Cunningham, Senior Member1. This application deals with an artificial scheme for apportioning awards of damages for negligence for personal injury reached in cases that have been settled by agreement between the parties. The apportionment is provided for in the Social Security Act 1991 (Cth). The damages are, broadly speaking, apportioned between compensation for lost earnings or lost earning capacity and other heads of compensation, such as pain and suffering. In nearly every case the apportionment is 50/50. This is so even though that apportionment will generally not reflect the actual division and will sometimes vary significantly from it. The apparent object of the scheme is to avoid the effect of agreements artificially inflating the component not based on lost income.
2. The issue in this case is what goes into the mix before the artificial division is made. It is accepted that compensation for any lost earnings, as well as for pain and suffering, goes into the mix. However, the Secretary of the Department of Education, Employment and Workplace Relations says that it also includes a raft of payments made by the Tasmanian Motor Accidents Insurance Board to third parties, such as hospitals and medical practitioners, which were made pursuant to Tasmanian legislation which did not depend upon any liability for negligence. Almost all the payments were made before any court proceedings were commenced. We have decided that the medical expenses are not to be included.
The Facts
3. Joel Morrison was injured in a motor accident on 18 January 2006. He suffered significant injuries, particularly head injuries, and was hospitalised. Fortunately, it seems that he made a good recovery. The cost of his hospitalisation and medical treatment totalled $51,528.56. It was paid by the Board direct to the service providers. There were approximately 33 payments. Some related to multiple items, particularly payments to hospitals. Some related only to single items, particularly payments to doctors. About 15 payments were for amounts less than $100. The largest was a payment to the Royal Hobart Hospital Private Patient Scheme for $14,763.10. Payment was effected either by electronic funds transfer or cheque. The payments were made between 8 March 2006 and 6 February 2008. All but one of them were made on or before 12 April 2007.
4. On 2 March 2007 Mr Morrison commenced proceedings at common law for damages for negligence. The action was settled on 8 November 2007 and judgment was entered in favour of Mr Morrison for $50,000. In accordance with the Tasmanian scheme relating to claims arising out of motor accidents the judgment excluded the medical expenses which had been paid by the Board. By contrast with some other states there was no requirement that the sums should be included in the judgment and repaid out of the judgment moneys. This is because, under the Tasmanian scheme, the moneys are paid by the Board in the first place, that part of the scheme being a no-fault liability scheme not dependant on any successful common law claim for damages for negligence.
Policy Considerations
5. The policy of the social security scheme under consideration is to identify the component of the compensation received by Mr Morrison which represents compensation for lost earnings and to calculate from that a period during which he would be disqualified from receiving certain social security benefits. In the case of Mr Morrison, the relevant social security benefit was Youth Allowance payable under Part 2.11 (s 540 ff) of the Act.
6. Mr Morrison accepts that the 50 percent rule applied to the judgment of $50,000. The Department, however, says that the figure to which the rule applied also included the total of the payments for medical expenses. The full amount was $103,655.73. In the one case the preclusion period is calculated by reference to the amount of $25,000 and in the other case, by reference to more than twice that sum.
7. If the Department is right the amount on which the calculation is based will be equivalent to the whole of the judgment. It will reflect an application of the rule which, in practical terms, deems the whole of the judgment to reflect lost earnings and nothing for other items such as pain and suffering.
8. Had the action gone to trial this would not have been the outcome. Indeed, there is reason to believe that Mr Morrison made a good recovery and that any lost income would be slight. Mr Morrison was aged 17 at the time of the accident and was in receipt of Youth Allowance although he was also engaged in part time work. Accordingly, his income was limited.
9. Approached from another point of view, if the Department is right the only payments excluded, in effect, pursuant to the 50/50 rule from the figures to be used to determine the preclusion period would be the medical expenses. Nothing would be excluded as representing pain or suffering or any other non-income element although the primary function of the 50/50 rule is to apportion between income and non-income elements. As will appear, these expenses were not specifically mentioned by the Minister when identifying the vice which the apportionment provisions were intended to address. In any event, given that the amount of medical expenses incurred by an injured person are generally readily and objectively determinable, it would be difficult to use them to assist in a subterfuge.
10. In cases involving large compensation payments for serious and long term injuries past medical expenses will not usually be a large component of the judgment as they are in a small case such as this. Yet the legislative scheme does not accommodate the differences.
11. The result contended for by Mr Morrison will have the practical effect that the judgment of $50,000 is apportioned 50/50 between loss of earnings and other compensation by contrast with 100% of it being apportioned to loss of earnings under the result contended for by the Department.
12. This Tribunal is not a court. It is part of the Administration of the Commonwealth of Australia. It is entrusted by the Parliament with bringing its own discretion to matters which come before it in place of the discretion exercised by the department or agency whose discretion it is re-considering as well as the discretion of intermediate tribunals, such as is the case here. The normative effect of decisions of the Tribunal and its role in improving the quality of administrative decision-making have been commented upon many times (see, for example, The Honourable Philip Ruddock MP, Remarks by the Attorney-General, speech delivered to the Administrative Appeals Tribunal’s 30th Anniversary Dinner, Canberra, 2 August 2006; and The Honourable Robert McClelland, The Role of Tribunals in the Administration of Justice, speech delivered to the 11th Annual Australasian Institute of Judicial Administration Tribunals Conference, Surfers Paradise, 6 June 2008).
13. In these circumstances the Tribunal thinks it appropriate to comment on the decision of the Department to bring this application for review of the decision of the Social Security Appeals Tribunal. In a case in which wider concepts of justice seem to have been secured by the decision of that tribunal it is difficult to see why it was thought to be good administrative decision-making to incur the time and expense of an application for review the cost of which must have substantially exceeded the amount at stake, namely $3,568.32.
14. The discretion available to us does not extend, however, to the question of whether the application should have been brought. We must decide the matter before us according to law. The matters we have referred to are not relevant to our consideration except to the extent to which considerations of the kind we have adverted to, as opposed to the facts of this case, are relevant to the correct interpretation of the statutory scheme.
The Legislation
15. A Youth Allowance payment is a "Social Security benefit" and therefore a "compensation affected payment" (see s 17(1) and s 23(1) of the Act).
16. Section 1169 of the Act provides that when a person receives a compensation affected payment and also receives a lump sum compensation payment the compensation affected payment is not payable to the person during the "lump sum preclusion period".
17. The length of the lump sum preclusion period is determined by the formula set out in s 1170 of the Act. The larger the lump sum compensation payment the longer is the period during which the person is precluded from receiving the Social Security benefit.
18. The policy objective of the compensation affected payment provisions in the Act is to ensure, as far as possible, that a person who receives a compensation payment for lost earnings or lost earning capacity does not also receive Social Security Income Support (see 4.13.4.10 of the Social Security Guide).
19. The principal focus of the provisions is therefore on compensation payments received by Social Security beneficiaries for lost earnings or lost capacity to earn income.
20. That focus is evident in s 17(2) of the Act which provides:
"Compensation
(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".
21. It became apparent that lawyers practising in workers' compensation and personal injury litigation were structuring lump sum settlement payments to understate the lost earnings or lost capacity to earn elements of settlements and to inflate pain and suffering and other non-income elements. The aim of this deception was obviously to increase the opportunity for the person also to continue to receive Social Security benefits.
22. Section 17(3) was enacted to address that mischief. It relevantly provides as follows:
"(3) ... 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."
23. The legislature also found it necessary to deal with another circumstance which might have avoided the impact of the compensation affected payments provisions. This was where compensation was effected by two or more payments. The response was the enactment of s 1171 of the Act which relevantly provides:
"(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."
24. The purpose behind s 1171 was explained in the following statement in the relevant Second Reading Speech delivered on 19 June 1995:
"The compensation recovery provisions of the [A]ct protect the social security system from 'double dippers' - that is, those who might receive social security payments, as well as compensation, for the same period. Several measures contained in this bill build on this comprehensive package of provisions. First, the provisions will clearly apply to superseded payment types. In other words, they will apply - as was always intended - to the forerunners of the payment types that are already specified in the current provisions.
Secondly, a trend in compensation settlements highlighted by the AAT case of Kilinc needs to be overcome. This trend has meant that the compensation recovery provisions have been avoided by splitting compensation settlements into two or more payments, only one of which - usually relatively small - is expressed to represent lost earnings or earning capacity and is therefore caught by the provisions."
25. The President described the statutory scheme in Fuller v Secretary, Department of Family and Community Services (2004) 83 ALD 152 at 155. It operates in the following way:
1.Has a person received a payment affected by the scheme such as Youth Allowance as well as a lump sum payment compensating, at least partly, for lost earnings or lost earning capacity?
2.If yes, identify all lump sum payments received by the person in relation to the event giving rise to the compensation payment.
3.Add all lump sum payments together.
4.Apply the 50/50 rule.
5.Calculate the preclusion period based on the result.
26. There is no doubt that the first question in the five steps is to be answered in the affirmative. Consideration of that question involves asking whether the $50,000 payment wholly or partly covers lost earnings. The second step does not, however, require any consideration of whether the payments relate to lost earnings, although they must be lump sum payments and they must be received by the subject.
The Issues
27. The issues in this case can now be isolated:
1.Were the payments made by the Board “lump sum payments”?
2.Did Mr Morrison receive the payments?
“Lump Sum Payments”
28. The first issue for us is whether approximately 33 payments made by the Board to doctors and hospitals, which cover nearly 200 items, were lump sum payments. The section requires us to address payments, not invoices or statements.
29. The payments made in the present case are outlined in schedules provided by the Board. The first schedule is contained in the documents filed pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth). This schedule identifies the payee, the invoice date and the date on which the claim was processed. It is the only schedule that was available to us at the hearing. The original schedule shows total payments of $53,655.73. When Disability Allowance payments made to Mr Morrison are deducted the total amount of medical payments is the figure of $51,528.56 shown above. However, when the same schedule was supplied to us again, after the hearing, it showed a different total, namely $53,771.73. The difference is not material. We will proceed on the figures originally provided.
30. After the hearing we were given two further schedules. One shows the actual dates of payment. However, any differences between processing dates and payment dates have not been reconciled or otherwise addressed. The other schedule seeks to collect invoices under each payee. It shows the processing date rather than the payment date. We will proceed on the basis that invoices processed together were paid together.
31. We find the original schedule the most revealing. It shows batching of invoices bearing the same date, and batching of invoices bearing different dates, for the same payee. It shows single payments, usually for small sums, apparently relating to one item. These payments are generally, but not always, payments to medical practitioners. For example, there is a payment of $88.00 to Royal Hobart Hospital for pathology services which was processed on 18 March 2006 with respect to an invoice dated 29 January 2006. There also appear to be situations where, although invoices have been batched, invoices of the same date have been included in different batches with invoices of another date. For example, there are four invoices for pathology services dated 20 January 2006. Three of them were batched with other invoices bearing similar dates and processed on 7 March 2006. The fourth invoice was batched with two invoices dated 19 January 2006 and processed on 16 June 2006.
32. Part of the process was explained by a representative of the Board as follows:
“6. Where payment for more than one service provided by a particular service provider was processed on a given date, only one payment was made to that service provider for the sum of all payments processed for that provider on that date. All but one of the payments to service providers were made by Electronic Funds Transfer (‘EFT’).
7. The reason that not all payments processed on a particular day for a particular service provider are grouped together in the ‘transaction date’ column in the Schedule is because invoices were not necessarily processed in chronological order. Although that was generally the case, it did not always happen. If payment for a particular service was processed out of chronological order then, because the Schedule is sorted by invoice date, the transaction date for payment for that service might be different from the transaction date for payment for the service shown immediately before or after that service.”
33. The question is whether these payments, or some of them, were lump sum payments within the meaning of the legislative scheme.
34. The President expressed opinions as to the meaning of the phrase “lump sum payment” in Fuller (at 161-2). Those views expressed some doubt as to the meaning attributed to the words by von Doussa J in Secretary,Department of Social Security v Banks (1990) 23 FCR 416; 95 ALR 605; 20 ALD 19 and Foster J in Secretary, Department of Social Security v Cunneen (1997) 78 FCR 576; 149 ALR 665; 48 ALD 251. However, on the facts of Fuller, which related to the components of a decision of this tribunal based on a settlement reached between the parties and particularly whether that part of the decision relating to costs should be included in the amount to be apportioned, the President concluded that all the sums should be included.
35. This case raises rather more squarely what is a lump sum payment and particularly what are the outer boundaries of what a lump sum can be.
36. The words are not defined in the Act. Their meaning must be found from their ordinary meaning viewed in the context of their use in the Act. The several possible variations in meaning referred to in Fuller (at 161-2) will certainly justify looking at extrinsic evidence.
37. Von Doussa J, in Banks (at FCR 422; ALR 612; ALD 24), said: “A ‘lump sum’ payment is simply one which includes a number of items”. In accordance with this definition, we cannot see how the individual payments for single items made to doctors can be lump sum payments. It would not, however, be a logical scheme, of the kind one would attribute to Parliament, to include any payments addressing, for example, multiple days in hospital and to exclude those covering single consultations with doctors.
38. We have concluded that, wherever the limit is to be found, more is required to amount to a lump sum payment for the purposes of the scheme than a set of payments for medical services whose grouping is neither entirely logical nor uniform which links items together in some cases and not in others.
39. In coming to this conclusion we take into account that a contrary construction would deprive some social security recipients of benefits to which they would otherwise be entitled and would potentially do this through the application of an arbitrary apportionment which will sometimes act unfairly. The object of the scheme being to remedy a perception that unscrupulous claimants, aided by their lawyers, would artificially structure settlements so that the apportionment provided for did not reflect the real basis for any settlement, we consider that what is a lump sum should be judged in that light. Nothing of the kind has occurred here. We pause to note that it seems surprising that the bulk of honest claimants and lawyers are required potentially to suffer unfairness because of the conduct of what must be a small number of dishonest ones.
40. The Department advanced a number of contentions in support of its view that the medical payments were lump sum payments. In essence they were as follows:
(a)The term "periodic payments" and "lump sum payments" were said to "cover the field". If a payment was not a "periodic payment", and these were not, then it was suggested that it follows that it must be a lump sum payment. It was argued that the payment of the hospital and medical expenses were therefore lump sum payments even if some of those payments were small amounts paid for a single item of service.
(b)It was also submitted that under s 27 of the Motor Accidents (Liabilities and Compensation) Act 1973 (Tas) when hospital and medical expenses are paid as "scheduled benefits", as occurred in this case, the amount of any award of damages is reduced accordingly. It was submitted that the consent judgment therefore encompassed the hospital and medical expenses even though most of those expenses had been paid at an earlier point in time.
(c)It was also suggested that, in any event, the payments to service providers which were batched together were lump sum payments. That view was said to be consistent with the meaning of lump sum payments as expressed by von Doussa J in Banks.
(d)It was further contended that a "purposive" interpretation of lump sum payments was appropriate. In order to achieve the true purpose of the legislation all payments relating to the one event which had given rise to an entitlement to compensation should be combined in the one compensation payment. It was suggested that if this was not done it would defeat the real purpose of the relevant provisions.
41. The Tribunal does not see merit in the proposition in (a) above. Consistent with the purpose behind the compensation affected payment provisions the definition of compensation in s 17(2) is principally directed at lump sum or periodic payments made "... wholly or partly in respect of lost earnings or lost capacity to earn". Section 17(2) is a definition of "compensation". The payments of Mr Morrison's hospital and medical expenses do not satisfy that definition. There is no income related component in those payments. Even if the two categories in s 17(2) were intended to “cover the field”, the field in s 1171 is a different and larger field to the field in s 17(2). It is difficult to see how the payments can be brought into the equation unless they are "lump sum payments" within the meaning of that term in s 1171. The word "compensation" is not part of that phrase. Under that provision the payments do not have to be compensation but they must relate to the same compensable event. If the legislature had intended that lump sum payments would include all payments other than periodic payments it could simply have used the word "payment" rather than "lump sum payment" which is obviously intended to have a particular meaning.
42. The Tasmanian motor accidents insurance arrangements include a no fault scheme. Under the scheme the Board was required to pay Mr Morrison's scheduled benefits, including his reasonable hospital and medical expenses, regardless of fault and whether or not any action was taken to recover damages. There is no requirement that these sums be included in the judgment and paid out of the judgment monies. The Board is responsible for the no fault scheme and is also the statutory insurer of drivers in Tasmania.
43. Section 27 of the Tasmanian Act appears to lead to a reduction of the award of any damages and comes into effect only after liability has been established. The reality, however, is that the hospital and medical expenses were not part of the settlement figure. The Tribunal is required to consider actual payments made and received not some hypothesis that the consent judgment encompassed the expenses that had been paid. The fact is that the hospital and medical expenses were clearly paid separately from the $50,000 lump sum settlement.
44. If contention (c) above was accepted it would lead to an absurd result. It would mean, for example, that a GP's account for two consultations would become a lump sum payment but a larger account for one specialist consultation would not. We cannot agree that such a result was intended by the Parliament.
45. We also consider that a purposive interpretation of the provisions does not assist the Department. The inclusion of approximately 33 individual payments for hospital and medical expenses does not fit well with the policy objective of the legislative scheme as stated in paragraph 18 above.
46. We accordingly conclude that whatever is the precise ambit of the phrase “lump sum payment” in the statutory scheme, it does not cover a schedule of payments for medical expenses not dependant on fault and paid continuously over a period of time and not lumped in any organised or ordered way for the purpose of payment and where many items could not be lump sums.
“Receives”
47. There is a further ground upon which we would, in any event, have found for Mr Morrison. In our opinion it cannot be said that the payments were received by Mr Morrison. We were referred by the Department's counsel to a number of authorities including Comcare v Fyfe [1999] FCA 1368. In that case Finn J (at [22]) adopted a purposive construction observing that the repayment provision was designed to prevent "double benefit" in the event of a successful damages claim. There is plainly no double benefit here. These payments were for hospital and medical expenses and were not in any sense income or income related payments. A strained interpretation of the meaning of "receives" in s 1171 is not justified in these circumstances.
48. In Allianz Australia Insurance Ltd v Insurance Australia Ltd t/as NRMA Insurance [2006] ACTCA 26 the Australian Capital Territory Court of Appeal said (at [9]):
"The statutory obligation on the employer to provide occupational rehabilitation, however, is not an amount received by the injured worker, nor is it a sum payable on the worker’s behalf to a medical practitioner in respect of accident related injuries. The worker has not received this money and is not "double dipping" if not required to repay it to the workers’ compensation insurer."
Mr Morrison's hospital and medical expenses may have been paid on his behalf and for his benefit but they were not received by him.
49. Section 17(5) defines "receives compensation". But here we are considering whether Mr Morrison received "lump sum payments". That sub-section appears not to have direct application in this case. If it does, however, we are of the opinion that the test in the sub-section is not satisfied. The payments were not received on Mr Morrison's behalf nor were they received at his direction.
Conclusion
50. The Tribunal therefore finds that the lump sum compensation payment is restricted to the $50,000 awarded in the consent judgment. The compensation part of the payment is $25,000 resulting in a preclusion period of 33 weeks which concluded on 17 January 2007. There was no Youth Allowance paid to Mr Morrison during that period and therefore there is no amount to be repaid by him. As Mr Morrison is not required to repay any portion of the Youth Allowance it is not necessary to consider the "special circumstances" provisions in s 1184K.
Decision
51. The decision of the Social Security Appeals Tribunal will be affirmed.
I certify that the fifty-one preceding paragraphs are a true copy of the reasons for the decision herein of Justice Downes, President, the Hon R J Groom, Deputy President and Ms A F Cunningham, Senior Member.
Signed: ..............[sgd]...........................................................
Gregory Cooper, AssociateDate of Hearing: 2 October 2008
Date of Decision: 12 November 2008
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Applicant: Mr P Gray
Solicitor for the Respondent: Hobart Community Legal Service
Counsel for the Respondent: Mr J Green
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