Mourilyan and Secretary, Department of Family and Community Services

[2000] AATA 1026

DECISION AND REASONS FOR DECISION [2000] AATA 1026

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q1999/619 

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      KEVIN MOURILYAN         
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       Mr K L Beddoe (Senior Member)            

Date23 November 2000 

PlaceBrisbane

Decision       The Tribunal decides: (a)            the decision under review is set aside; (b)          the amount of $16,107 is not in respect of lost earnings or lost capacity to earn; and (c)        the matter is remitted to the respondent to recalculate the lump sum preclusion period taking into account the Tribunal's decision.
  (Sgd) K L Beddoe
   Senior Member
Decision No: 2000/1026
CATCHWORDS
SOCIAL SECURITY – preclusion period imposed on payment of disability support pension to applicant after receipt of a lump sum compensation payment – whether special circumstances exist to treat all or part of the compensation payment as not having been made – whether interest on the economic loss component of the compensation payment should have been used to calculate the preclusion period
Social Security Act 1991 ss 17, 1165, 1184
Fire and All Risks Insurance v Callinan (1987) 140 CLR 427
Cullen v Trappell (1980) 29 ALR 1
Thompson v Faraonio (1979) 24 ALR 1

REASONS FOR DECISION

23 November 2000    K L Beddoe (Senior Member)     

1. The applicant was in receipt of a payment of damages arising from an accident in his employment.  The respondent imposed a lump sum preclusion period from 15 June 1996 to 2 August 2002.   On review the respondent corrected the calculation of the preclusion period to 15 June 1996 to 29 June 2000.  The applicant sought review of that decision which was subsequently affirmed by the Social Security Appeals Tribunal.  The applicant now seeks review in this Tribunal.

2. Section 1165(2AA) of the Social Security Act 1991 ("the Act") provides, so far as is relevant, that if a person receives or claims a compensation affected payment (in this case a disability support pension), is a member of a couple, and receives a lump sum compensation payment after 20 March 1997 then no compensation affected payment is payable to the person for the lump sum preclusion period. There is no dispute that the applicant received a lump sum compensation payment after 20 March 1997.

3. Sub-section 1165(5) fixes the commencement of the "lump sum preclusion period" as the day after the last day of the periodic payment period. Section 17(1) of the Act relevantly defines the periodic payment period in relation to a series of periodic payments as the period in respect of which the payments are, or are to be, made.

4. The number of weeks in the preclusion period is the number worked out under the following formula rounded down to the nearest whole number:-

Compensation part of lump sum
Income cut-out amount
(ss 1165(8) and (9))

1. For the purposes of the Act compensation is defined to mean, inter alia, a payment of damages or a payment under a scheme of compensation under a State law that is made wholly or partly in respect of lost earnings or lost capacity to earn and made either within or outside Australia (s 17(2)).

2. Also for the purposes of the Act the compensation part of a lump sum compensation payment is, on the facts of this case, so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn.

3. Section 17(4) excludes from the lump sum compensation payment an amount equal to the amount of periodic compensation payments required to be repaid on receipt of the lump sum compensation payment.

4. Section 1184 of the Act provides a discretion whereby the Secretary may treat the whole or part of a compensation payment as not having been made, or not liable to be made, if the Secretary thinks it is appropriate to do so in the special circumstances of the case. By virtue of section 43 of the Administrative Appeals Tribunal Act 1975 this Tribunal may exercise that discretion.

5. At the hearing Mr Mumford, instructed by the Welfare Right's Centre, appeared for the applicant and Mr McQuinlan represented the respondent. The documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal as the T documents and further documents, being two medical reports, were tendered and marked as exhibits. Oral evidence was given by the applicant's wife. The medical reports explain the applicant's absence from the hearing and I make no adverse inference from his failure to give evidence.

10. I make the following findings of fact:-

(a)On 2 December 1993 the applicant suffered an accident for which liability was accepted by the Workers' Compensation Board of Queensland and in satisfaction of which the Board made periodic compensation payments.

(b)On 27 June 1996 the applicant lodged a claim for pension (a pension had previously been paid) and notified his claim for a payment of lump sum compensation.  A consequence was that the Department of Social Security wrote to the applicant by letter dated 19 July 1996 with advice about the possibility of pension benefits being repayable upon receipt of a lump sum compensation payment and pension benefits not being payable in the future because of the lump sum preclusion period.

(c)Following trial the District Court gave judgment on 26 August 1998 for the applicant in an amount of $201,620.01 made up as follows:

Past Economic Loss  $115,200.00

Interest thereon  16,107.00

General Damages  35,000.00

Griffith v Kerkemeyer  18,746.00

Interest thereon  1,747.00

Fox v Wood8,042.75

Special damages  6,320.61

Interest thereon  456.65  ___________

Total$201,620.01

Less amount repayable to Work Cover

Queensland  78,410.76  __________

Net Judgment  $123,209.25

__________

(d)The amount recoverable by Work Cover Queensland as successor to the Workers' Compensation Board of Queensland was made up as follows:

Weekly benefit  $44,677.28

Medical Expenses  1,362.76

Other Expenses  466.00

Rehabilitation Expenses  2,532.00

Disability Settlements  29,372.72

___________

Total$78,410.76

___________

(e)The respondent, acting through Centrelink, imposed a charge for an amount of $15,838.24 for pension payments made during the period 24 June 1996 to 20 August 1998.

(f)The respondent, again acting through Centrelink calculated and notified on 3 September 1998 a lump sum preclusion period from 15 June 1996 (when periodic compensation payments ceased) to 2 August 2002.  The lump sum preclusion period was calculated as follows:-

Past Economic Loss  $115,200.00

Interest thereon  16,107.00  ___________

$131,307.00    ___________

$131,307= 320 weeks

$410

being the period 15 June 1996 to 2 August 2002.  

(g)The applicant received $82,325 of the $201,620 awarded by the Court calculated as follows:-

Amount of Judgment  $201,620.00

Deduct:

Refund to Work Cover Queensland  $78,410.76

Health Insurance Commission  46.10

Department of Social Security  15,838.24

Legal fees, medical and other expenses

In relation to the case  25,000.00

__________

119,295.00

Balance to applicant  82,325.00  ___________

$201,620.00

___________

(h)Following representations, including representations from a Member of Parliament, Centrelink admitted that the calculation of the lump sum preclusion period was incorrect and notified a revised period, 15 June 1996 to 29 June 2000 by letter dated 18 January 1999.  That calculation is not exhibited but essentially took into account the refund of $44,677.28 to Work Cover Queensland for weekly benefits.

(i)The applicant and his wife have lived on and operated a 17 acres rural property since 1989.  I am satisfied they have plans for the property that extend beyond a hobby farm and have sought to establish an educational/tourist cattle stud suitable for visits by school groups in particular.  These plans have been slow in becoming reality because of the applicant's medical circumstances and a resulting adverse effect upon his wife.  They also have the care of two foster children, one who has been with them on a long term basis.  I am satisfied, on the material before me, that the applicant's wife now has to manage the household and the property because of the applicant's medical conditions.

(j)Following the judgment in the applicant's favour and because of pressure from their bank the applicant and his wife paid $33,000 off the property mortgage.  I accept that this payment was made in the context that the bank had held its hand pending the resolution of the claim for compensation and then required the substantial payment to put the mortgage account back in order.  It was not suggested that the applicant and his wife had any real option in making this payment unless they were prepared to risk foreclosure by the bank.

(k)A motor vehicle was replaced because, I was told and I accept, the previous vehicle had been the subject of police attention and resulting advice that it was no longer roadworthy.  The replacement second hand 1992 model 4WD vehicle cost $23,000.  I accept that it was necessary to purchase a vehicle of adequate capacity and which the applicant in particular was able to drive.

(l)A farm shed was destroyed in a storm and was replaced at a cost of $4,719.  Also boundary fencing which was no longer viable was replaced at a cost of $2,900, a ride-on mower was purchased for $2,150 and milking machines for $1,350.  Moneys were expended in paying outstanding tax agent fees and family loans ($2,800 in total).

(m)The amount of $82,325 has been effectively accounted for.  There is no amount expended which could be said to have been expended for other than good purpose.

The Applicant's Submissions

11. This is not a case where compensation moneys have been spent unwisely but the applicant is in straitened financial circumstances through no fault of his own.  The applicant is clearly physically and mentally incapacitated which combined with the ill health of his wife leaves them in a precarious position.  The applicant received $82,325.  Special circumstances are established.  Interest on economic loss represents compensation for lost opportunity, not economic loss.

The Respondent's Submissions

12. The fact of ill health and the fact of straitened financial circumstances does not justify a finding of special circumstances.  The family is receiving income support and the applicant is receiving the pension at the time of the hearing.

Consideration

13. The applicant has been subjected to a lump sum preclusion period (on the Authorised Review Officer's decision) in accordance with the provisions of the Act. The amount taken into account for this purpose is $86,630 which is an amount in excess of the amount of $82,325 actually received by the applicant after he paid his lawyers.

14. It might be reasonable to assume that the applicant may not have obtained judgment except for the fact of engaging lawyers to conduct his case.  The payment of the lawyers is not, and was not in this case, a voluntary act but rather an essential outgoing for the purpose of progressing and succeeding with the claim for damages.  Whether there was an order for costs in the applicant's favour is not apparent from the material before me.  It may be, notwithstanding obtaining judgment, the applicant was not entitled to an order for costs because of a payment into court or some other reason.  I simply do not know.  However I accept that the payment of $25,000 for lawyers and associated disbursements was an essential expense.

15. The remaining amounts deducted from the award of damages were statutory charges over which the applicant had no control and which were deducted from the damages because of the statutory provisions.

16. The result was that the applicant was left with less than the amount of the compensation part of the lump sum as calculated under the Act. I am satisfied that this must be seen as an unintended result. The clear intention is that double dipping is to be avoided by adopting a preclusion period which in effect prevents double dipping.

17. It is a different issue if an applicant is to be denied benefits because of an assumed payment which he did not and could not get as a monetary amount as in the present case.  That is to convert beneficial legislation into penal legislation.  That was not the intention of the legislation which intended to allow the applicant $410 per week.  In fact, the decision under review allowed him only $390 per week ($82,325 ÷ 211 weeks).

18. In my view the result is both unfair and unintended and constitutes special circumstances.

19. The applicant's submission that interest on damages for past economic loss is not a compensation payment is supported by reference to the decision in Fire and All Risks Insurance Co Ltd v Callinan (1978) 140 CLR 427 where the High Court said at 433:-

"A money award is the only compensation which the law can provide in respect of the suffering of those detriments and if interest is to be awarded "on the whole or any part of that sum for the whole or any part of the period" between the arising of action and judgment, s. 72(1), a proper exercise of discretion must necessarily involve the paying of due regard to the time of manifestation and to the duration of the various detriments in question."

20. In Cullen v Trappell (1980) 29 ALR 1 at 12-13 Gibbs J discussed the question of interest payable on damages awarded for economic loss. His Honour adopted dicta of Lord Fraser in Thompson v Faraonio (1979) 24 ALR 1 at 7 where in delivering the judgment of the Privy Council and after distinguishing pre-trial damages and post-trial damages:-

"If damages for economic loss are calculated in two parts – as compensation for pre-trial loss and for post-trial or future loss – it cannot be right to award interest on the part awarded for future loss.  The reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident.  But the amount of damages that would have been awarded to him at the date of the accident in respect of economic loss would not have been the same as that awarded to him at the trial, because it would have been discounted to the earlier date."

21. In the light of those authorities it must be accepted that the amount of interest ($16,107) awarded was for the applicant being kept out of his money in relation to the losses previously incurred.

22. Whether, notwithstanding that interest is a payment related to time, it can also be characterised as compensation as defined in sub-section 17(2) of the Act is the issue to be decided.

23. "Compensation" is relevantly defined by sub-section 17(2) to mean:

"(a)     a payment of damages; or
(b)       a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c)       a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d)       any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments) that is:
(e)       made wholly or partly in respect of lost earnings or lost capacity to earn; and

(f)made either within or outside Australia."

24. I am satisfied that the award of interest was a payment of damages.  This is a wide term which reflects the whole ambit of losses likely to be claimed in a personal injuries case.  Damages are essentially losses suffered because of a breach of a tort quantified as to a monetary amount.  If the claimant was not entitled to damages for past economic loss then clearly there would be no right to claim interest.  If the damages were settled on the day of injury in a personal injuries case then there would be no past economic loss and no right to interest thereon.

25. I am satisfied that damages awarded because a claimant has been kept out of the damages payable on the date of accident by an intervening period of time between the accident and the award of damages, may be distinguished from damages in respect of lost earnings or lost capacity to earn.   It is compensation for being kept out of the payment of damages and is made wholly in respect of time lost rather than lost earnings or lost capacity to earn.  I have considered whether the interest should be characterised as damages made wholly or partly in respect of lost earnings.  I am satisfied the interest does not have this character.  Rather it is a payment to reflect the fact that the damages awarded were not paid on the date of the accident so that there is a deemed loss of interest on the damages awarded but the payment is not correctly characterised as in respect of lost earnings or lost capacity to earn.  The loss is a financial loss caused by and arising out of the delayed payment of damages.  It is not related to lost earnings or lost capacity to earn because although they are factors in the determination of damages to be paid they are not factors in the determination of the loss suffered by the claimant because he has been kept out of his money.

26. I have therefore come to view that the interest awarded in respect of damages for past economic loss is not within the definition of compensation in section 17(2) of the Act. The amount of $16,107 is not in respect of lost earnings or lost capacity to earn and is not to be included in the compensation part of the lump sum compensation payment . I so decide.

27. There is another aspect of this case which I should mention.  It was not argued before me but there are generally sound reasons why amounts recovered by Work Cover Queensland should not be included in the compensation part of a lump sum compensation payment.  Those amounts are recovered by Work Cover Queensland under statutory powers and it seems, are not part of a payment in respect of lost earnings or lost capacity to earn in the hands of the plaintiff.  However, I have made no decision on the point because no benefit could flow to the applicant.

28. The decision under review will be set aside and the matter remitted to the respondent to recalculate the lump sum preclusion period taking into account the Tribunal's decision that the payment in respect of Interest ($16,107) is not in respect of lost earnings or lost capacity to earn so that the compensation part of the lump sum compensation payment is reduced accordingly.

I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of K L Beddoe (Senior Member)

Signed:         .....................................................................................
  Associate

Date/s of Hearing  26 July 2000 
Date of Decision  23 November 2000
Counsel for the Applicant        Mr BHP Mumford
For the Respondent                 Mr R McQuinlan, Advocate