Nehme and Secretary, Department of Family and Community Services - [2002] AATA 1225

DECISION AND REASONS FOR DECISION [2002] AATA 1225

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2002/658

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

DECISION

Tribunal Mr M J Sassella, Senior Member

Date27 November 2002
PlaceSydney

Decision The tribunal affirms the decision under review.

[SGD] Senior Member
CATCHWORDS
SOCIAL SECURITY - Newstart Allowance - receipt of compensation - period of preclusion from entitlement to allowance - whether legal costs component of compensation award was compensation

Social Security Act 1991 ss 17(1), (2), (2A), (2B), (3), 23(1) ("social security benefit"), 1169(1), 1170(3)-(5), 1171(1), 1178, 1179, 1182, 1183, 1184, 1184A, 1184B, 1184C, 1184D, 1184E, 1184J, 1184K
Workers' Compensation Act 1987 (NSW) ss 40, 60, 66, 67

a'Beckett, Secretary, Department of Social Security v (1990) 21 ALD 79
Banks, Secretary, Department of Social Security v (1990) 23 FCR 416
Beaumont, Re Secretary, Department of Social Security and (1990) 20 ALD 482
Cunneen, Secretary to the Department of Social Security v [1997] 1033 FCA
Hulls, Secretary, Department of Social Security v (1991) 22 ALD 570

REASONS FOR DECISION

27 November 2002 Mr M J Sassella, Senior Member

THE APPLICATION

This is an application to the Administrative appeals Tribunal ("the tribunal") by Phillip Nehme ("the applicant"), born 20 July 1948, for review of a decision dated 25 October 2001 (T12) of a Centrelink sub-delegate of the Secretary, Department of Family and Community Services ("the respondent), a decision which was affirmed by the Social Security Appeals Tribunal ("the SSAT") in its decision dated 5 April 2002 (T2). The decision was the applicant had received a compensation settlement of $140,000 which resulted in a charge of $17,820.74 over the compensation amount and a period running from 15 December 1997 to 9 April 2000 during which the applicant was precluded from receiving any compensation affected payment from Centrelink.
THE HEARING
The tribunal convened a hearing in this matter in Sydney on 10 October 2002. Mr R Goodridge of counsel represented Mr Nehme. Ms H Schuster of the Centrelink Advocacy and Administrative Law Team represented the respondent. The tribunal heard no evidence but was addressed on legal issues. The tribunal took into evidence and marked as exhibits the following documents:
Exhibit TD1 – Section 37 Statement and associated documents (exhibits T1 – T24) provided by the respondent.
Exhibit A1 – Applicant's statement of facts and contentions, 6 August 2002.
Exhibit R1 – Respondent's statement of facts and contentions, 3 October 2002.

FINDINGS ON MATERIAL QUESTIONS OF FACT WITH REFERENCE TO THE EVIDENCE AND OTHER MATERIAL IN SUPPORT OF THOSE FINDINGS

On 15 December 1997 the applicant was involved in a motor vehicle accident. He was injured and sued for compensation (ex A1).
On 28 September 2001 the common law proceedings arising from the motor vehicle accident were settled for $120,000 plus costs agreed at $20,000 (ex A1). The terms of settlement were filed at the District Court of NSW on 8 October 2001 (T15).
The settlement amount included an allowance for lost earnings or lost capacity to earn (T2/5).
On 21 September 2001 a delegate in Centrelink provided an estimate of the charge and preclusion period for a settlement figure of $120,000 (T7).
On 25 October 2001 the decision under review was made and the applicant was notified. This identified the settlement figure as $140,000.
The applicant was in receipt of Newstart Allowance ("NSA") between 15 December 1997 and 9 April 2000 (T2/5). NSA is a "social security benefit" under s 23(1) of the Social Security Act 1991 ("the Act"). A social security benefit is a "compensation affected payment" in accordance with s 17(1) of the Act.
For a compensation affected payment actually to be affected the amount received by the NSA recipient must be "compensation" in accordance with s 17(2) of the Act:
Compensation
17.(2) Subject to subsection (2B), for the purposes of this Act, compensation means:
(a)       a payment of damages; or
(b)       a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c)       a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d)       any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
The compensation received by Mr Nehme was compensation under s 17(2)(c) of the Act.
As the compensation was paid in the form of a lump sum s 17(3) of the Act applies to the compensation to help derive the "compensation part of a lump sum compensation payment":
Compensation part of a lump sum
17.(3) Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a)       50% of the payment if the following circumstances apply:
(i)        the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)       the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise; or
…
Section 17(3) has the effect that 50% of Mr Nehme's compensation is the compensation part of his lump sum compensation payment.
Section 1169(1) of the Act explains the interaction between receipt of compensation and a compensation affected payment:
Compensation affected payment not payable during lump sum preclusion period
1169.(1) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
Section 1170(3)-(5) of the Act deals with the lump sum preclusion period in Mr Nehme's situation:
1170.(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170.(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
[Compensation part of lump sum divided by Income cut-out amount]
1170.(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
In Mr Nehme's case this resulted in the preclusion period noted above in paragraph 1.
Section 1178 of the Act applies where, as here, an allowee has received NSA during the preclusion period. Section 1179 sets the amount of the required repayment in such a case, here $17,820.74.
There is a discretion in s 1184K of the Act whereby a delegate may treat the whole or part of a compensation payment as not having been made if the delegate thinks it appropriate to do so "in the special circumstances of the case". In the present case the applicant had pressed unsuccessfully for the application of this discretion. However, at the tribunal hearing that approach was abandoned in favour of a set of submissions to the effect that the $20,000 allowed for legal costs in the settlement figure was not part of the compensation received by the applicant. If correct this would exclude the $20,000 from account in assessing the compensation part of the lump sum.
mr goodridge's submissions
Mr Goodridge presented a thoughtful and interesting set of submissions on the applicant's behalf. At base he submitted that a damages claim can be settled for an amount "plus costs" or "costs inclusive". Where the settlement is plus costs it can take a long time, possibly years, to determine costs. In such a case neither the respondent nor Centrelink would know what ultimately occurs regarding costs. The plaintiff would escape any preclusion period in respect of these costs. Mr Goodridge suggested that no plaintiff would ever quantify costs in the settlement process if that quantification led to the imposition of an extended preclusion period. In Mr Nehme's case the costs were settled early, were known to the respondent, and the respondent sought to include them as compensation.
Mr Goodridge suggested that s 17(2) of the Act does not apply to costs. He submitted that "damages" do not equal "costs". The submission was that where costs are separately identified the legislation, s 17(2), does not apply to the costs. He suggested that the decided cases, where it had been held that costs were to be included in the compensation amount, were cases in which the costs had not been separately identified.
Mr Goodridge cited the decision of the Federal Court of Australia in Secretary to the Department of Social Security v Cunneen [1997] 1033 FCA. In that case a workers' compensation claim was settled for a total of $58,775. This was made up of:

$2,500 – total weekly compensation payments for 18 August 1988 to 24 March 1994 related to s 40 of the Workers' Compensation Act 1987 (NSW) ("the NSW Act").
$12,510 – a payment under s 66 of the NSW Act in respect of permanent impairment of the back.
$9,382.50 – a payment under s 66 of the NSW Act in respect of loss of use of the right leg at or above the knee.
$9,382.50 – a payment under s 66 of the NSW Act in respect of loss of use of the left leg at or above the knee.
$15,000 – a payment under s 67 of the NSW Act for pain and suffering.
$10,000 – a payment under s 60 of the NSW Act for medical expenses.
The respondent to pay the applicant's costs as agreed or taxed.

Additional sums were included as interest on the ss 66 and 67 sums:

$6,000 – interest on the s 66 sums.
$2,725 – interest on the s 67 sum.

The case largely dealt with whether the $2,500 for weekly payments was to be included as compensation under the equivalent to s 17(2) or whether it was to be disregarded as an arrears under s 17(4A) of the Act. With that element gone, it was arguable that no other item in the settlement package related to compensation for lost earnings or loss of earning capacity.
Mr Goodridge identified that Foster J in Cunneen (above) had used a figure for the total settlement amount that ignored the $8,725 paid by way of interest. Mr Goodridge argued that if, as the respondent argued, every element of a settlement package had to be brought to account for the purposes of s 17(2) once there was an element of compensation for lost earnings or loss of earning capacity, then the interest in Cunneen (above) would have been included by Foster J.
Before addressing that argument the tribunal considers that reference should be made to a number of the remarks of Foster J in Cunneen (above). He relied heavily on the remarks of von Doussa J in Secretary, Department of Social Security v Banks (1990) 23 FCR 416.
"In Banks the respondent had received weekly payments of workers' compensation for an injured back. In November 1988 his compensation entitlements were settled through the making of a consent order in the Industrial Court of South Australia which required the employer to pay $34,000, being an assessment of compensation payable under the Workers' Compensation Act 1971 (SA) for injuries which had resulted in total or partial incapacity. Additionally, the employer was required to pay $1,000 in redemption of liability to pay future medical expenses. Under s 153 of the Social Security Act 1947 (Cth) Banks was precluded from receiving benefits under that Act for a period calculated in the same manner as provided for by ss 17(3), 1165(1) and 1165(4) of the present legislation. Consequently, a determination was required of 'the compensation part of the lump sum payment by way of compensation'. This was 50% of the 'lump sum payment'.
"The Department of Social Security calculated the 'compensation part' by taking the whole of the $35,000 as being the 'lump sum payment'. On appeal to the Administrative Appeals Tribunal the $1,000 for future medical expenses was excluded from the lump sum. On appeal to this Court, von Doussa J restored the original decision holding that the 'lump sum payment' embraced the total amount paid in settlement of the claim, even though it clearly included amounts for heads of loss which were unrelated to capacity for work. Such heads were for pain and suffering, disfigurement and future medical expenses.
"In reaching this decision his Honour had regard to part of the history of the legislation, which I shall not repeat in detail here. It is clear that problems had arisen as a result of settlements in workers' compensation jurisdictions obscuring the fact that payments were being received in respect of lost earnings or earning capacity. Where social security benefits conditioned upon such incapacity were also being received, undesirable 'double-dipping' was resulting, with the consequence that Social Security benefits were being misapplied. His Honour had regard to the Second Reading Speech for the Bill introducing the Social Security Amendment Act 1988 (Cth) which introduced the sections in question in order to identify the mischief which it was intended to rectify. The relevant passage read as follows (Hansard, House of Representatives, 13 April 1988, p 1498):-
'This Bill contains measures to improve the administration and integrity of compensation recovery provisions. Where a person receives personal injury compensation that makes up for lost income the Social Security Act provides that pension or benefit may be reduced or recovered. This is one way in which social security expenditures are directed to those most in need.
'Settlements of lump sum compensation particularly in the workers compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of Social Security payments. To prevent this abuse the Minister announced on 8 February 1988 that, for future personal injury settlements made by agreement or by consent order, 50 per cent of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect that proposal. Where, on the other hand, a court has made an order after a contested hearing specifying the economic loss component, the Secretary to the Department will continue to have regard to the characterisation given to the board by the court.'
"His Honour said of the relevant section that it introduced 'an arbitrary formula to be applied if the lump sum payment was made in settlement of a claim' (p 422). He went on to say (at 422-423):-
'Section 152(2)(c) applies where there is "a lump sum payment by way of compensation". The expression "payment by way of compensation" is defined in s 152(2)(a). The words "lump sum" are not defined. They are not words of art. In the Macquarie Dictionary in a "lump sum" is defined as a sum "including a number of items taken together or in the lump". In my opinion the words bear that meeting in the section. The words are used in Pt XVII of the Act to distinguish "lump sum payments by way of compensation" from "periodical payments by way of compensation"... A. "lump sum" payment is simply one which includes a number of items. Where a payment by way of compensation consists of the aggregate of several amounts which could have been paid separately or at different times the payment is one of a lump sum. A payment the total of which is arrived at by adding amounts for different heads of loss would also be a lump sum payment.'
"His Honour also said (at pp 423-4):-
'... Thus, subpar (i) will apply to the total amount paid in settlement of the claim if the amount paid is in some part in respect of incapacity for work and if the claim relates in some part to disease or injury. This will be so even though the lump sum also clearly included amounts for heads of loss which are unrelated to incapacity for work, for example for pain and suffering, for disfigurement, or for future medical expenses in relation to disease or injury. This will also be the case where the lump sum payment is in settlement of the claim which includes a head of loss that is unrelated either to incapacity for work or to disease or injury, for example, a component for property damage. [Tribunal's emphasis]
'The wide language of subpar (i) is a recognition by Parliament that unless every component part of lump sum payment made in settlement of the claim which has the prescribed characteristics is brought to account the mischief to which par (c) is directed will not be remedied. The scope for manipulation by inflating some heads of loss and diminishing or excluding others, without altering the total amount of the lump sum, would otherwise remain. The prescribed percentage (50 per cent) of the lump sum payment made in settlement of the claim which by s 152(2)(i) is deemed to be "compensation part of a lump sum payment by way of compensation" shall be viewed as a broad attempt to balance the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures. The paragraph seeks to eliminate double dipping in a practical way which operates effectively in a straight forward manner.'
"His Honour was, accordingly, of the opinion that the amount of $1000 which was part of the settlement should have been included in the calculation of the 'compensation part of a lump sum payment'.
"I am of the opinion that the same reasoning applies in respect of the sections under consideration in this case, as they would appear to be no more than a recasting without substantial alteration of the sections considered by his Honour."
While it appears that Foster J did exclude the interest amounts from the settlement there was no explanation offered as to why he did this. The case is, therefore, not ideal authority for the purposes of Mr Goodridge's argument. There may have been some agreement between the parties not to address the interest issue or the matter may have been overlooked by the applicant's counsel and everyone else. It may be that, conceptually, the interest was regarded as separate from the settlement, although the tribunal cannot see why that would be so. Without anything explicit it is not possible to draw firm conclusions. The tribunal notes that there was provision for costs as agreed in the settlement terms. The quantum of the costs was never included in any determination.
However, the tribunal noted above von Doussa J's comments on the width of the provision equivalent to s 17(3)(a)(i) of the Act. He emphasised that the provision applied "where the lump sum payment is in settlement of a claim which includes a head of loss that is unrelated either to incapacity for work or to disease or injury, for example, a component for property damage". It is not much of a jump, if at all a jump, to add that this may be the case where a settlement occurs of a claim that includes a head of loss unrelated to incapacity for work, injury or disease, such as a component for legal costs to enforce his or her rights.
In any event, the tribunal notes that s 17(2)(c), which applies in the instant case, refers to a "payment" not limited to "damages" as is the case in s 17(2)(a) of the Act. The "payment" in s 17(2)(c) applies to all that results from "settlement of a claim for damages". The natural meaning of s 17(2)(c) would include a payment referable to legal costs received as part of a settlement of a claim. As von Doussa J said, Parliament intended s 17(2) and (3) to cast a very wide net. The legislation includes references to the few recognised exemptions in s 17(2A) and (2B).

Mr Goodridge may be correct in submitting that the earlier authorities involved settlements where there was no amount specified for the plaintiff's legal costs. There was a global settlement figure from which costs of an undisclosed or uncertain amount were to be paid by the plaintiff. However, several authoritative earlier cases have addressed the scenario before the tribunal in the instant case and have suggested an outcome inconsistent with that pressed by Mr Goodridge.
In Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 Mr Hulls was injured in a motor vehicle accident while working for Australia Post in 1984. He was paid workers' compensation for a period and sued the other driver in a common law damages action. This action was settled in 1988 for $70,000. His legal costs were almost $12,000 but were not identified as an item in the settlement figures which were a simple global sum. The tribunal had held that the legal costs could be deducted from the compensation amount used in calculating the preclusion period. The tribunal made this decision using the then equivalent section to the current s 1184K of the Act to find special circumstances. It did not adopt a modified interpretation of the concept of compensation as defined in s 17(2) of the Act.
The tribunal had made its decision on the assumption that an amount for legal expenses would have been excluded from the settlement lump sum if the amount had been agreed upon between the parties. At pages 578-579 the judge said:
"I agree with the actual decision of the tribunal that the correct amount of the lump sum in this case was $70,000 but I cannot agree with the tribunal that this figure would have been reduced if the parties to the settlement of the common law claim for damages had agreed upon an amount for costs....
"I have come to the conclusion that, in this case, the amount of the lump sum was $70,000 and hence, subject only to the possible application of [s 1184K], the 'compensation part' was $35,000. Although the tribunal also came to this conclusion it did so only because it concluded that 'there was no separate allowance' made for legal costs in the figure of $70,000. The tribunal correctly noted that 'costs' are to be distinguished from 'damages' but, in my opinion, incorrectly concluded that if an amount for costs had been identified by the parties to the settlement then the amount so identified would have been deducted from the $70,000 in order to arrive at the amount of the lump sum.
"This settlement was in respect of a common law claim for damages; it is a fact that the overwhelming number of such settlements contain an element of legal costs just as it is a fact that many such settlements are negotiated by arriving at a global figure which is said to be 'inclusive of costs'. It is as commonplace for any such settlement to contain an element for costs as it is to contain elements to special damages, for general damages for pain and suffering and for economic loss. The legislation would have been fully aware of all such components when the '50% rule' was introduced. It is my opinion that the tribunal concluded that there were special circumstances warranting the application of [s 1184K] to the legal costs predominantly -- if not only -- because of the perceived failure of the parties to the settlement to identify and quantify the costs. The tribunal said (at 331-2): 'If they had been awarded as a separate item from the lump sum payment of damages, they would not have been included in the lump sum payment figure used pursuant to s 152(2)(c). It is certainly not [unusual] for costs to be included in the lump sum but is more usual for them to have some separate character. It seems to us, therefore, that this is a proper case in which there are special circumstances which made it appropriate to treat that part of the settlement moneys spent on legal fees to be treated as not having been made as part of the payment by way of compensation, ie $11,966.12.'
"In a'Beckett's case, supra, the social [sic] Security Appeals Tribunal was of the opinion that the pensioner's legal costs of $6000 should have been excised from the settlement sum of $60,000 for the purpose of applying the '50% rule'. Von Doussa J said: 'If any part of the sum of $60,000 received by the respondent were a payment of the kind described in s 152(2)(a), being a payment in whole or in part in respect of incapacity for work, the component in that sum representing legal costs should probably be treated as part of the "lump sum payment by way of compensation".' I respectfully agree with these remarks.
"... it is not to the point, in my opinion, to say that legal expenses did not relate to an incapacity for work. Even though such a statement may be literally true, it cannot assist Mr Hulls. A 'payment by way of compensation' is, according to s 152(2)(c) a reference to one or more of the four nominated types of payment that is or are 'in whole or in part, in respect of incapacity for work' (emphasis added)."
At page 581 O'Loughlin J found that there were no special circumstances warranting the application of [s 1184K] in Mr Hulls' favour. It would seem that his common law claim for damages was a routine claim. The judge said there was nothing to suggest any circumstance was present that made it special. He said that it was commonplace for such claims to be settled on the basis of a global sum with the plaintiff meeting his liability for his legal costs.
In Re Secretary, Department of Social Security and Beaumont (1990) 20 ALD 482 Mr Beaumont had suffered a work injury in 1985. In 1989 he was awarded a lump sum payment of compensation, by consent, amounting to $116,000. The amount was said to cover a number of items but made no mention of legal costs. The SSAT had decided that, before calculating the compensation part of the lump sum payment, Mr Beaumont's legal costs associated with the compensation claim were to be deducted from the $116,000. Deputy President Burns held that the Act did not authorise the exclusion of any legal costs from the lump sum before calculating the "compensation part of that lump sum". At page 483 the learned Deputy President said:
"(12) The relevant provisions of the Act do not authorise costs (legal or otherwise) being excluded from the lump sum, before calculating the compensation part of the lump sum payment by way of compensation in accordance with s 152(2)(c)(i)(A) or (B). It is clear, in my opinion, because of the inherent difficulties associated with ascertaining in lump sum settlements with any degree of certainty, what portion is in fact compensation in respect of incapacity for work that parliament is fixed a certain percentage, ie 50%. It follows that parliament has intended the remaining 50% to be the compensation, costs and other sums which are not in respect of incapacity for work. The lump sum in this particular case did not include the sum for costs -- it comprised the total of the amounts of $25,000, $5000 and $86,000 previously outlined. Even if the lump sum had included legal costs, then there is no warrant to exercise them from the lump sum before making the necessary calculation." [Tribunal's emphasis]
In Secretary, Department of Social Security v a'Beckett (1990) 21 ALD 79 von Doussa J said in passing:
"The SSAT was of the opinion that the respondent's legal costs of the County Court action amounting to $6000 should be excised from the payment of $60,000 for the purposes of applying the formula in s 152(2)(c)(i), … A delegate of the secretary, however, did not follow this recommendation, and on 12 December 1988 affirmed the earlier decision to preclude the respondent from benefits for a period of 63 weeks. If any part of the sum of $60,000 received by the respondent were a payment of the kind described in s 152(2)(a), being a payment in whole or in part in respect of an incapacity for work, the component in that sum representing legal costs should properly be treated as part of the 'lump sum payment by way of compensation'. This is more recently been determined by the Administrative Appeals Tribunal in Re Secretary, Department of Social Security and Weir (1989) 19 ALD 107; and see Secretary, Department of Social Security v Banks (1990) 20 ALD 19. The delegate was therefore correct to this regard that part of the recommendation which related to costs, and the contrary has not been suggested on this appeal."
The tribunal concludes from this survey of the authorities that it is well accepted by the Federal Court of Australia and by the tribunal that legal costs are not to be excised from the lump sum compensation payment for the purposes of the application of s 17(3) of the Act. This has been the case regardless of whether a settlement occurs on the basis of a lump sum payment which makes no reference to legal costs, or on the basis of a lump sum payment "inclusive of costs" but leaving them unquantified, or on the basis of a lump sum payment inclusive of costs which have been quantified.
The tribunal has considered Mr Goodridge's submissions in paragraph 18 above and has concluded as follows. Mr Goodridge raised the problem of a settlement for a certain figure "plus costs" which are not quantified at the time. As the authorities show, this is not a variation that has presented itself in the decided cases. In the decided cases the final settlement figure has been agreed and the Act's consequences flow from that. In Mr Nehme's case this variation did not present itself. A final figure, ie $140,000, was agreed upon and paid.
As regards Mr Goodridge's hypothetical case of the settlement "plus costs", the tribunal doubts that such an arrangement would be of great attraction to many defendants. They seem to prefer to settle for a global figure inflated somewhat by a costs allowance. However, even if Mr Goodridge is correct, the respondent would have the same statutory rights in respect of both instalments of the compensation payment, the corpus of the award and the later determined costs element.
The Act would operate as follows. Section 1171(1) of the Act applies to convert the two payments into one lump sum payment:
Deemed lump sum payment arising from separate payments
1171.(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.
Centrelink will have sent to the compensation payer a notice in accordance with ss 1182, 1183 and 1184 of the Act:
Secretary may send preliminary notice to potential compensation payer or insurer
1182.(1) If:
(a)     a person (the claimant) makes a claim against another person (the potential compensation payer) for compensation; and
(b)       the claimant claims a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the potential compensation payer that the Secretary may wish to recover an amount from the potential compensation payer.
1182.(2) If:
(a)     a person (the claimant) makes a claim against a person (the potential compensation payer) for compensation; and
(b)       the claimant claims a compensation affected payment for a day or days in the periodic payments period or the lump sum preclusion period, as the case may be; and
(c)       an insurer, under a contract of insurance, may be liable to indemnify the potential compensation payer against any liability arising from the claim for compensation;
the Secretary may give written notice to the insurer that the Secretary may wish to recover an amount from the insurer.
1182.(3) A notice must contain:
(a)       a statement of the potential compensation payer's or insurer's obligation under section 1183; and
(b)       a statement of the effect of section 1184D so far as it relates to the notice.
Compensation payer or insurer must notify Secretary of liability
1183.(1) If a person (the potential compensation payer):
(a)       is given a notice under subsection 1182(1) in relation to a person; and
(b)       whether before or after receiving the notice, the potential compensation payer becomes liable to pay compensation to the person;
the potential compensation payer must give written notice to the Secretary of the liability within 7 days after:
(c)     becoming liable; or
(d)       receiving the notice;
whichever happens later.
Penalty:         Imprisonment for 12 months.
1183.(2) If an insurer:
(a)       is given a notice under subsection 1182(2) in relation to a claim by a person; and
(b)       whether before or after receiving the notice, the insurer becomes liable to indemnify the potential compensation payer, either wholly or partly, in relation to the claim;
the insurer must give written notice to the Secretary of the liability within 7 days after:
(c)       becoming liable; or
(d)       receiving the notice;
whichever happens later.
Penalty:         Imprisonment for 12 months.
1183.(3) Strict liability applies to:
(a)       an element of an offence against subsection (1) that a notice is a notice under subsection 1182(1); and
(b)       an element of an offence against subsection (2) that a notice is a notice under subsection 1182(2).
Secretary may send recovery notice to compensation payer or insurer
1184.(1) If:
(a)       a person (the compensation payer):
(i)        is liable to pay compensation to a person (a claimant); or
(ii)       where the compensation payer is an authority of a State or Territory, has determined that a payment by way of compensation is to be made to a claimant; and
(b)     the claimant has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the compensation payer that the Secretary proposes to recover from the compensation payer the amount specified in the notice.
1184.(2) If:
(a)     an insurer is liable, under a contract of insurance, to indemnify a compensation payer against any liability arising from a person's claim for compensation; and
(b)       the person has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the insurer that the Secretary proposes to recover from the insurer the amount specified in the notice.
1184.(3) If a compensation payer or insurer is given notice under subsection (1) or (2), as the case may be, the compensation payer or insurer is liable to pay to the Commonwealth the amount specified in the notice.
1184.(4) The amount to be specified in the notice is the recoverable amount under section 1184A.
1184.(5) A notice under this section must contain a statement of the effect of section 1184D so far as it relates to such a notice.
1184.(6) This section applies to an amount payable by way of compensation in spite of any law of a State or Territory (however expressed) under which the compensation is inalienable.
The section 1184 recoverable amount
1184A.(1) If a person receives compensation affected payments in relation to a day or days in a lump sum preclusion period, the recoverable amount under this section is equal to the smallest of the following amounts:
(a)     the sum of all compensation affected payments made to the person that relate to a day or days in a lump sum preclusion period;
(b)       the compensation part of the lump sum payment;
(c)       in the case of a compensation payer—the maximum amount that the compensation payer is liable to pay to the person in relation to the matter at any time after receiving:
(i)        a notice under section 1182 in relation to the matter; or
(ii)       if the compensation payer has not received a notice under section 1182—the notice under section 1184 in relation to the matter;
(d)       in the case of an insurer—the maximum amount for which the insurer is liable to indemnify the compensation payer in relation to the matter at any time after receiving:
(i)        a notice under section 1182 in relation to the matter; or
(ii)       if the insurer has not received a notice under section 1182—the notice under section 1184 in relation to the matter.
1184A.(2) Subject to subsection (4), if:
(a)       a person receives compensation affected payments in relation to a day or days in a periodic payments period; and
(b)       either:
(i)        the person is not a member of a couple; or
(ii)       the person's partner neither receives nor claims a compensation affected payment in relation to any day in the periodic payments period;
the recoverable amount under this section is equal to the smallest of the following amounts:
(c)       the difference between:
(i)        the sum of all compensation affected payments made to the person that relate to a day or days in a periodic payments period; and
(ii)       the sum of all compensation affected payments that would have been made to the person in relation to any such day or days had those payments been reduced in accordance with section 1173;
(d)       the sum of the amounts of the periodic compensation payments;
(e)       in the case of a compensation payer—the maximum amount that the compensation payer is liable to pay to the person in relation to the matter at any time after receiving:
(i)        a notice under section 1182 in relation to the matter; or
(ii)       if the compensation payer has not received a notice under section 1182—the notice under section 1184 in relation to the matter;
(f)        in the case of an insurer—the maximum amount for which the insurer is liable to indemnify the compensation payer in relation to the matter at any time after receiving:
(i)        a notice under section 1182 in relation to the matter; or
(ii)       if the insurer has not received a notice under section 1182—the notice under section 1184 in relation to the matter.
1184A.(3) Subject to subsection (4), if:
(a)       the person claiming compensation is a member of a couple; and
(b)       compensation affected payments received by the person were received in relation to a day or days in a periodic payments period; and
(c)       the person's partner receives a compensation affected payment in relation to a day or days in the periodic payments period;
the recoverable amount under this section is equal to the smallest of the following amounts:
(d)       the difference between:
(i)      the sum of all compensation affected payments made to the person and the person's partner in relation to a day or days in the periodic payments period; and
(ii)       the sum of all compensation affected payments that would have been made to the person and the person's partner in relation to any such day or days had those payments been reduced as a result of the operation of section 1173 or 1174;
(e)       the sum of the amounts of the periodic compensation payments;
(f)        in the case of a compensation payer—the maximum amount that the compensation payer is liable to pay to the person in relation to the matter at any time after receiving:
(i)        a notice under section 1182 in relation to the matter; or
(ii)       if the compensation payer has not received a notice under section 1182—the notice under section 1184 in relation to the matter;
(g)       in the case of an insurer—the maximum amount for which the insurer is liable to indemnify the compensation payer in relation to the matter at any time after receiving:
(i)        a notice under section 1182 in relation to the matter; or
(ii)       if the insurer has not received a notice under section 1182—the notice under section 1184 in relation to the matter.
1184A.(4) If:
(a)     at the time of the event that gave rise to the entitlement of a person to compensation, the person was qualified for, and was receiving, a compensation affected payment; and
(b)       the person or the person's partner received or claimed a compensation affected payment in relation to a day or days in the periodic payments period;
the recoverable amount is the amount determined by the Secretary to be the total amount by which the person's, or the person's partner's, compensation affected payment in relation to a day or days in the periodic payments period would have been reduced if a determination had been made under Division 7 of Part 3 of the Administration Act because of point 1064-E3, 1066A-F2A, 1067G-H25, 1067L-D24, 1068-G8A, 1068A-E13 or 1068B-D21 of this Act.
Preliminary notice or recovery notice suspends liability to pay compensation
1184B.(1) If a compensation payer has been given a notice under section 1182 or 1184 in relation to the compensation payer's liability, or possible liability, to pay compensation, the compensation payer is not liable to pay that compensation while the notice has effect.
1184B.(2) If an insurer has been given a notice under section 1182 or 1184 in relation to the insurer's liability, or possible liability, to indemnify a compensation payer against a liability arising from a claim for compensation:
(a)       the insurer is not liable to so indemnify the compensation payer; and
(b)       the compensation payer is not liable to pay that compensation;
while the notice has effect.
Compensation payer's or insurer's payment to Commonwealth discharges liability to compensation claimant
1184C.(1) Payment to the Commonwealth of an amount that a compensation payer is liable to pay under section 1184 in relation to a person operates, to the extent of the payment, as a discharge of the compensation payer's liability to pay compensation to the person.
1184C.(2) Payment to the Commonwealth of an amount that an insurer is liable to pay under section 1184 in relation to a person operates, to the extent of the payment, as a discharge of:
(a)       the insurer's liability to the compensation payer; and
(b)       the compensation payer's liability to pay compensation to the person.
Offence to make compensation payment after receiving preliminary notice or recovery notice
1184D.(1) If a person (the potential compensation payer) has been given a notice under section 1182 or 1184 in relation to the payment of compensation to a person, the potential compensation payer must not make the compensation payment to the person.
Penalty:         Imprisonment for 12 months.
1184D.(1A) Subsection (1) does not apply if:
(a)       in the case of a notice under section 1182—the Secretary has given the potential compensation payer written notice that the notice under section 1182 is revoked; or
(b)       in the case of a notice under section 1184—the potential compensation payer has paid to the Commonwealth the amount specified in the notice; or
(c)       the Secretary has given the potential compensation payer written permission to pay the compensation.
1184D.(2) If an insurer has been given a notice under section 1182 or 1184 in relation to the insurer's liability to indemnify a compensation payer, the insurer must not make any payment to the compensation payer in relation to that liability.
Penalty:         Imprisonment for 12 months.
1184D.(2A) Subsection (2) does not apply if:
(a)     in the case of a notice under section 1182—the Secretary has given the insurer written notice that the notice under section 1182 is revoked; or
(b)       in the case of a notice under section 1184—the insurer has paid to the Commonwealth the amount specified in the notice; or
(c)       the Secretary has given the insurer written permission to pay the amount.
1184D.(3) Strict liability applies to an element of an offence against subsection (1) or (2) that:
(a)     a notice is a notice under section 1182; or
(b)       a notice is a notice under section 1184.
Liability of compensation payer or insurer to pay the Commonwealth if there is a contravention of section 1184D
1184E.(1) A compensation payer or insurer who contravenes section 1184D is, in addition to being liable under that section, liable to pay to the Commonwealth:
(a)       if the contravention relates to a notice under section 1182—an amount determined by the Secretary; or
(b)       if the contravention relates to a notice under section 1184—the recoverable amount specified in the notice.
1184E.(2) The amount determined by the Secretary under paragraph (1)(a) must not be more than the smallest of the amounts worked out:
(a)       if the person is not a member of a couple—under subsection 1184A(1), (2) or (4), as the case requires; or
(b)       if the person is a member of a couple—under subsection 1184A(1), (2), (3) or (4), as the case requires.
1184E.(3) This section applies in relation to a payment by way of compensation in spite of any law of a State or Territory (however expressed) under which the compensation is inalienable.
…
Division 6—Miscellaneous
Secretary may give recovery notice either to compensation payer or to insurer but not to both
1184J.(1) The Secretary is not to give a notice to an insurer under section 1184 about a matter if there is a notice to a compensation payer under section 1184 in force in relation to the same matter.
1184J.(2) The Secretary is not to give a notice to a compensation payer under section 1184 about a matter if there is a notice to an insurer under section 1184 in force in relation to the same matter.

This throws upon the compensation payer and/or insurer a strict obligation to notify Centrelink of payments made and equips Centrelink to make the relevant decisions as to recovery of amounts and preclusion periods. In a "plus costs" settlement it would be an administrative matter for Centrelink to check periodically to ascertain what has occurred in relation to any subsequent payments if there is any concern that the compensation payer may be unreliable. This appears to answer Mr Goodridge's concerns as to the practicality of regarding a "plus costs" settlement as one where costs are included as part of the compensation.
CONCLUSION
The tribunal has found that the quantum of the lump sum compensation payment in Mr Nehme's case is $140,000 and that the $20,000 legal costs are compensation in accordance with s 17(2)(c) of the Act. Mr Nehme's application to the tribunal therefore fails.
DECISION
The tribunal affirms the decision under review.
I certify that the 41 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M J Sassella, Senior Member
Signed:         .....................................................................................
  Associate
Date of hearing  10 October 2002
Date of decision  27 November 2002
Counsel for the applicant         Mr R Goodridge
Solicitor for the applicant         Firths – the Compensation Lawyers
Advocate for the respondent    Ms H Schuster, Centrelink Advocacy and Administrative Law Team