O'Rourke and Secretary, Department of Employment and Workplace Relations
[2006] AATA 1067
•12 December 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 1067
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/356
GENERAL ADMINISTRATIVE DIVISION ) Re NICOLE O'ROURKE Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT & WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Deputy President P E Hack SC Date12 December 2006
PlaceBrisbane (Heard in Cairns)
Decision The Tribunal:
1. Sets aside the decision under review;
2. In substitution therefore decides to exercise the discretion in s 1184K(1) of the Social Security Act such that so much of the compensation payment be treated as not having been made as would require the Secretary to refund to the applicant $8,250.00 of the compensation charge of $17,693.65.
3. Both parties are at liberty to apply if there is a need to adjust the precise form of words required to give effect to this decision.
...............Signed................
Deputy President
CATCHWORDS
SOCIAL SECURITY – parenting payment single – lump sum compensation – preclusion period – Centrelink erroneously advised compensation charge would be nil – Centrelink deducted compensation charge from lump sum – special circumstances – decision under review set aside
Social Security Act 1991 (Cth) Part 3.14, s 1184K(1)
Groth v Secretary, Department of Social Security (1996) 40 ALD 541
Trimboli v Secretary, Department of Social Security (1989) 17 ALD 201
REASONS FOR DECISION
12 December 2006 Deputy President P E Hack SC Introduction
1.On 21 July 2001 the applicant, Mrs Nicole O’Rourke, sustained injuries in a motor vehicle accident. She engaged lawyers to act for her and recover damages. Those lawyers enquired of Centrelink as to the amount of any settlement that would be charged in favour of Centrelink if the matter was settled. They were informed on two separate occasions that no amount would be charged. That, it turns out, was wrong. But Mrs O’Rourke says that she settled her claim for a figure of $127,500.00 on the basis of that advice. Then, after settlement, Centrelink said that she had to pay a “compensation charge” of $17,693.65. This amount was deducted from her settlement sum.
2.Mrs O’Rourke says that the giving of the erroneous advice, and her reliance upon it, constitute “special circumstances” that warrant the Tribunal exercising the discretion to waive all or part of the compensation charge. The Secretary says that the giving of erroneous advice does not amount to special circumstances and that accordingly waiver is not warranted.
Background
3.I should start by mentioning briefly the scheme of the legislation that is in play when recipients of social security benefits receive lump sum compensation payments. The legislation is aimed at preventing those receiving compensation for loss of income from receiving benefits from the public purse. Where the lump sum settlement includes a component of economic loss, Part 3.14 of the Social Security Act 1991 (Cth) has the effect that 50% of the lump sum is taken to be for lost earnings or lost capacity to earn. This amount is the “compensation part of the lump sum”. This sum is then used to calculate a period of time when a person will not be eligible to receive Centrelink payments (with some exceptions). This is called the preclusion period. If, during the preclusion period, the person has received Centrelink payments then the Social Security Act creates a statutory charge over the settlement funds to the extent of the payments made. The licensed insurer is obliged to pay the amount of the charge to Centrelink in priority to payments to the person entitled to the benefit of the settlement.
4.Given the way in which the statute operates solicitors routinely make enquiries of Centrelink prior to any settlement to ascertain the preclusion period and the amount of any statutory charge. Indeed Centrelink has a standard form for solicitors making such enquiries.
5.Against that statutory framework I set out the facts. There is no dispute about what follows. It is taken, in the main, from the Secretary’s Statement of Facts and Contentions.
6.Mrs O’Rourke suffered personal injuries in a motor vehicle accident on 21 July 2001. She suffered a soft tissue injury. From the description she gave in her evidence it appears to have been an injury to the cervical spine. She retained Murray Lyons, a firm of Cairns solicitors, to act for her.
7.From 21 November 2001 Mrs O’Rourke was in receipt of Parenting Payment Single.
8.On 20 November 2003 Murray Lyons forwarded to the “Compensation Recovery Team – Centrelink” two of the Centrelink standard form documents called “Estimate of Social Security Charge/Preclusion”. The form says that it is:
… to help compensation claimants and their advisers understand the likely effect a proposed lump sum may have on future social security entitlements and recovery of past social security payments.
9.The forms were completed in such a way as to request from Centrelink an estimate of the lump sum preclusion period and the amount to be repaid to Centrelink for the proposed lump sum settlements of $100,000.00 and $150,000.00. The following day Centrelink returned the form to the solicitors with a preclusion period of 21 July 2001 to 17 January 2003 for a $100,000.00 settlement and of 21 July 2001 to 24 October 2003 for a settlement of $150,000.00. In each case the estimated charge amount was inserted as “nil”.
10.In July 2005 Mrs O’Rourke’s claim for damages was settled on the basis of a single payment to her of the sum of $127,500.00 inclusive of claim and costs. Immediately prior to settling, Mrs O’Rourke’s solicitor telephoned Centrelink and was again told that there was no charge amount. The date of settlement does not appear precisely, as the standard form of release and discharge in favour of the other party and his insurer is undated, but it was forwarded to Centrelink by the solicitors for the insurer on 7 July 2005.
11.Armed with this information Centrelink calculated a compensation part of $63,750.00 which, on the basis of a divisor of $664.63, gave a preclusion period of 95 weeks, that is, from 21 July 2001 to 16 May 2003. During this period Mrs O’Rourke was paid recoverable Centrelink payments of $17,693.65. Centrelink gave notice to the insurer of the amount of the charge on 8 July 2005. A copy was sent to the solicitors for Mrs O’Rourke.
12.On 15 July 2005 those solicitors wrote to Centrelink seeking advice as to the method of calculation of the charge in light of the estimates earlier given that no charge would be imposed. The letter said, in part:
We advise that the settlement of this matter was based on the amount of your estimates …”
13.Centrelink responded by letter dated 18 July 2005 advising that the earlier estimates were “incorrect” and acknowledging that the fact that Mrs O’Rourke had been in receipt of Parenting Payment Single since 21 November 2001 “should have been picked up when estimate completed.” That elicited a further letter from Murray Lyons dated 2 August 2005 requesting a review and waiver on the basis of Centrelink’s error. Again, that letter pointed out that:
our client’s agreement to settle her claim for $127,500.00 was partially based on the fact that Centrelink had previously advised that the refund owing to the Department was NIL.”
14.The decision was reviewed and affirmed by the original decision maker on 4 August 2005 and by an authorised review officer on 31 August 2005. It was affirmed by the Social Security Appeals Tribunal on 16 January 2006.
15.Mrs O’Rourke accepts that the calculation undertaken by Centrelink is correct and that, absent the error in notification in November 2003, the preclusion period and the amount of the statutory charge was correct. Her case is that there are special circumstances that warrant all or part of the compensation payment made to her as not having been made.
Special circumstances
16.The discretion that Mrs O’Rourke seeks to have exercised in her favour is contained in s 1184K(1) of the Social Security Act. It provides:
For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
17.Mrs O’Rourke relies upon two matters as constituting special circumstances – the erroneous advice provided by Centrelink and her financial circumstances. As to the first, she says that she would have pressed for a higher settlement sum had she been informed correctly by Centrelink of the amount that they would seek to recover. The Secretary responds by contending that the giving of incorrect advice by Centrelink does not amount to a special circumstance. I assume that the Secretary does not, by this submission, intend to suggest that the making of an egregious error of this nature is commonplace. And, says the Secretary, Mrs O’Rourke has not provided any evidence that a request by her for a higher settlement sum would have been successful.
18.That latter submission is an unattractive one and it is made more unattractive by the present context. The reality of personal injury litigation is that it would never be possible to put on evidence that an insurer would have been prepared to settle at a higher figure than that at which a settlement was reached. Settlement involves both parties making a calculated estimate at the likely award by a court.
19.So far as Mrs O’Rourke’s financial circumstances are concerned they are, to my mind, a neutral factor. That is, her position is neither desperate nor comfortable. She depends on social security payments. At the time of the hearing before the Social Security Appeals Tribunal she retained some $17,000.00 of the settlement sum but that has now been spent.
20.The expression “special circumstances” is used in a variety of contexts in the Social Security Act. The jurisprudence regarding its meaning suggest that the expression is not capable of precise or exhaustive definition. In Groth v Secretary, Department of Social Security[1] Kiefel J spoke of the requirement of circumstances that distinguish the particular case from others.
[1] (1996) 40 ALD 541 at p 545
21.In my view the error made by Centrelink does constitute special circumstances, that is, the error, and the applicant’s reliance upon erroneous advice to her detriment, is a feature that distinguishes this case from similar cases. It is to be expected that in the usual case Centrelink will correctly answer enquiries of the type made here. I do not doubt that in a common law setting the advice of Centrelink would be regarded as being negligent. The occasion was a serious one and it must have been plain to Centrelink that the advice would be relied upon as, indeed, it was.
22.The situation here is not far removed from the position considered by the Full Court of the Federal Court in Trimboli v Secretary, Department of Social Security[2]. In that case the appellant had recovered compensation for a work injury but the Department had miscalculated the amount of the charge and recovered from him an amount in excess of its entitlement. At issue in the Tribunal was the discretion in s 115E of the Social Security Act, similar to that in s 1184K(1), to treat the whole or part of a payment of compensation as not having been made. Hill J, with whom Woodward and Beaumont JJ agreed, remarked that it was neither appropriate nor proper to attempt a definition of what circumstances will be “special”. But his Honour went on to say:[3]
While there was material before the Tribunal from which it was clear that the Department had miscalculated the amount of the charge and that the applicant had thereby been deprived of money which was rightfully his from the redemption award, it does not seem from the reasons of the Tribunal that this was a factor taken in to account under s 115E notwithstanding that it was conceded before us, and in my opinion correctly conceded, that these were relevant matters which could be taken into account in determining both that there were special circumstances in the present case and that it was appropriate to exercise the discretion under s 115E.
It seems to me that while a pensioner who has been deprived of money may have no legal right to interest unless awarded it in curial proceedings, the exercise of discretion under s 115E in an appropriate case can substantially put a pensioner who does not commence court proceedings in the same position as one who does and thereby prevent an anomalous situation arising.
[2] (1989) 17 ALD 201.
[3]At 210.
23.It seems also to me that the present case is not far removed from the example given by his Honour and that while, as in the present case, a pensioner has been deprived of the opportunity of achieving a higher settlement through the negligence of Centrelink has no legal right to damages except through curial proceedings, the exercise of the discretion under s 1184K can substantially put a pensioner who does not commence court proceedings in the same position as one who does and thereby prevent an anomalous situation.
24.Having concluded that the circumstances are “special” I have a discretion to treat the whole or part of the compensation payment as not having been made. It seems to me that in exercising that discretion I ought to seek to put Mrs O’Rourke back in the position that she would have been in had Centrelink properly informed her solicitor of the correct position. That is, I ought not seek to make good the representation made by Centrelink for to do so would put Mrs O’Rourke in a more favourable position than she would have been had she been correctly advised.
25.Of course the Secretary’s contention is that Mrs O’Rourke has not provided any evidence that a request for a higher settlement sum would have been successful. That contention, whilst impractical, is correct. But it would be impossible to obtain such evidence. I consider that what I ought do is regard Mrs O’Rourke as having been deprived, by Centrelink’s error, of the opportunity of settling at a higher amount. Given that the initial enquiry of Centrelink in November 2003 was for proposed settlements of $100,000.00 and $150,000.00 I infer that that was the range of damages that the solicitor then had in mind. In an area which is, of necessity, speculative, I consider that practical justice will be done in the present case by exercising the discretion on the basis that it was likely, had Mrs O’Rourke been correctly informed by Centrelink, that she would have pressed for, and received, a greater sum. Given the range that is evidenced by the earlier enquiry I consider that I should proceed on the basis that Mrs O’Rourke would have received an additional $10,000.00, that is, that she would have settled at $137,500.00.
26.On that basis the compensation part of the settlement sum is $68,750.00. Using the same divisor, $664.63, yields a preclusion period, rounded down, of 103 weeks. The present preclusion period is 95 weeks. According to Exhibit 6, the schedule of benefits paid, Mrs O’Rourke was receiving fortnightly payments of $426.10 at the end of the preclusion period. Thus, I calculate that had Mrs O’Rourke settled for $137,500.00 she would have had to pay an additional charge of $1,704.40. That is, she would have received an additional amount, after the charge, of $8,295.60. I will round that off to $8,250.00.
27.In the result I would set aside the decision under review and exercise the discretion in s 1184K(1) of the Social Security Act such that so much of the compensation payment be treated as not having been made as would require the Secretary to refund to the applicant $8,250.00 of the compensation charge of $17,693.65.
28.I shall give both parties liberty to apply if there is a need to adjust the precise form of words required to give effect to this decision.
I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC
Signed: ...................Signed................................................
Lynne Stalley, Personal AssistantDate of Hearing 28 November 2006
Date of Decision 12 December 2006
Applicant in person
Solicitor for the Respondent Mr M Black, Centrelink Legal Services
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