PETRINE KEECH and SECRETARY, DEPARTMENT OF HOUSING, FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2012] AATA 147

[2012] AATA 147 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2010/3334
Re	PETRINE KEECH
APPLICANT
And	SECRETARY, DEPARTMENT OF HOUSING, FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
RESPONDENT

Decision

Tribunal	Ms K Hogan, Member
Date	2 March 2012
Place	Perth

The Tribunal decided to vary the Decision under review and to refer the matter back to the respondent to calculate the preclusion period applicable to the applicant’s age pension by reference to a relevant compensation payment of $100,000.00.

...(sgd) Ms K Hogan....

Ms K Hogan, Member
Catchwords

SOCIAL SECURITY – benefits and pensions – preclusion period – compensation payment for personal injury received while in receipt of pension payments – special circumstances.

Legislation
Social Security Act 1991(Cth), ss. 17, 23, 1064, 1160, 1161, 1168, 1170, 1182, 1183, 1184, 1184A, 1184C, 1184K, 1191-1194.
Workers' Compensation and Injury Management Act 1981 (WA).

Cases

Re Beadle and Director-General of Social Security [1984] AATA 176; (1985) 7 ALD 670

Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076; (2007) 96 ALD 129
Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281
Dranichnikov v Centrelink (2003) 75 ALD 134; [2003] FCAFC 133
Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152; [2004] AATA 615
Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541
Kertland v Secretary, Department of Family and Community Services [1999] FCA 1596; (1999) 95 FCR 64
Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876; (2000) 106 FCR 281
Secretary, Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 116 FCR 1

Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67; (2002) 116 FCR 348

REASONS FOR DECISION

Ms K Hogan, Member

2 March 2012

History

1.          The applicant sustained an injury at work on 2 February 2007.

2.          The applicant received periodic payments of weekly compensation from 4 September 2007 until 2 February 2008.

3.          From 3 February 2008 to 6 April 2008 the applicant took leave from work.

4.          The applicant resigned from work on 6 April 2008.

5.          On 9 April 2008 the applicant lodged a claim for age pension and was granted age pension from that date.

6.          On 13 January 2010 a memorandum of consent judgment was signed by the applicant’s solicitor and the solicitor representing the Minister for Health recording settlement of the applicant’s compensation claim for $100,000.00 in addition to all payments made by the Minister for Health to the applicant in accordance with the Workers’ Compensation and Injury Management Act 1981(WA), plus costs of $20,000.00 inclusive of disbursements (“the compensation payment”).

7.          On 22 January 2010 a Centrelink Officer applied a preclusion period in respect of the compensation payment from 3 February 2008 to 14 August 2009 and to recover an amount of $20,092.79 from the applicant’s compensation settlement being for age pension paid to her in the period 9 April 2008 to 15 August 2009.

8.          On 11 February 2010 the applicant’s solicitors requested on her behalf a review of the decision of 22 January 2010 by an Authorised Review Officer (“ARO”).

9.          On 29 March 2010 an ARO affirmed the decision of 22 January 2010.

10.        On 22 June 2010 the applicant appealed the ARO’s decision to the Social Security Appeals Tribunal (“SSAT”).

11.        On 14 July 2010 the SSAT affirmed the ARO’s decision.

12.        The applicant applied by these proceedings to review that decision.

IssueS

13.        The issues to be considered by the Tribunal are:

(a)   whether the applicant is precluded from receiving age pension as a result of the settlement of her compensation claim,

(b)   if so, what is the period that the applicant is precluded from receiving the age pension; and

(c)   whether the amount of $20,092.79 was correctly recovered by Centrelink from the compensation settlement, and

(d)   whether there are any special circumstances that warrant the waiving of the preclusion period in respect of the settlement.

Legislative Framework and Policy

14. Part 3.14 of the Social Security Act 1991 (Cth) ("the Act") contains provisions for compensation recovery. Section 1160 of the Act describes the effect of that Part in the following terms:

"1160(1) This Part operates in certain specified circumstances to do one or more of the following:

(a)reduce a person's compensation affected payment;

(b) render a person's compensation affected payment not payable;

(c) require the repayment of some or all of a person's compensation affected payment; because of the receipt of compensation by the person or the person's partner.

1160(2) This Part applies whether or not there is any connection between the circumstances that give rise to the person's qualification for the compensation affected payment and the circumstances that give rise to the receipt of compensation by the person or the person's partner."

15. The age pension is a "compensation affected payment", pursuant to paragraph (b) of the definition of that term in s 17(1) of the Act. The lump sum payment of compensation was "compensation" pursuant to the definition of that term in s 17(2) of the Act, as it was made partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

16. Division 3 of Part 3.14 of the Act provides for the "lump sum preclusion period" where compensation is received. Section 1170 of the Act deals with the situation where a person receives both periodic payments of and a lump sum payment of compensation, in the following terms:

"1170 (1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:

(a)begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and

(b) ends at the end of the number of weeks worked out under subsections (4) and (5).

1170(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:

(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and

(b) ends at the end of the number of weeks worked out under subsections (4) and (5).

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

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."

17. Section 1168 of the Act, which is also in Division 3 of Part 3.14 of the Act provides that:

"A provision of this Division that refers to a person receiving or claiming a compensation affected payment and receiving a lump sum compensation payment has effect regardless of whether the lump sum compensation payment was received before or after the person received or claimed the compensation affected payment."

18. The formula adopted by s. 1170(4) of the Act requires the "compensation part of lump sum" and the "income cut out amount" to be ascertained.

19. Section 17(3)(a) of the Act relevantly defines the " compensation part of a lump sum payment " to be 50% of the payment where:

"(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

20. Section 17(1) of the Act defines the "income cut out amount" to mean, in relation to a person who has received a compensation payment, the amount worked out using the formula in s 17(8), as in force at the time when the compensation was received. Section 17(8) of the Act provides that:

"For the purposes of the definition of income cut-out amount in subsection (1), the formula is as follows:

where:

maximum basic rate means the sum of the amount specified in column 3 of item 1 in Table B in point 1064-B1 and the amount of pension supplement worked out under point 1064-BA2 for a person who is not a member of a couple.

Note: Point 1064-BA2 refers to maximum basic rate. Maximum basic rate depends on a person's family situation. The rate used here is the rate for a person who is not a member of a couple.

ordinary free area limit means the amount specified in column 3 of item 1 in Table E-1 in point 1064-E4.

pharmaceutical amount for a single person means the amount specified in column 3 of item 1 in the Pharmaceutical Allowance Amount Table in point 1064-C8."

21. The amounts identified in the tables in s.1064 of the Act are subject to adjustments for CPI indexation in the manner prescribed by ss1191 - 1194 of the Act.

22. Section 1182 of the Act provides for the Respondent to issue a preliminary notice to a person, including an insurer of a person against whom a compensation claim has been made, that the Respondent may wish to recover an amount from the insurer. Where such a notice is given, s 1183 of the Act requires the insurer to notify the Respondent of any liability it has to pay compensation. Section 1184 of the Act then relevantly provides that:

"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."

23. Section 1184A of the Act then provides for the recoverable amount, being the lesser of a number of possible amounts. The lower amount in this case is that provided for by s 1184A(1)(a) of the Act, being:

"the sum of all compensation affected payments made to the person that relate to a day or days in a lump sum preclusion period".

24. Section 1184C(2) of the Act provides that:

"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."

25. Finally, section 1184K(1) of the Act provides that:

"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."

Applicable Principles

26. The term "special circumstances" is not defined by the Act, and the approach of the Tribunal and the Federal Court in a large number of cases has been to regard the matters to which the Tribunal may have regard when considering whether special circumstances exist as unconfined. Although it dealt with a somewhat different provision to s 1184K of the Act, the following passage from the decision of this Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 is often cited in this kind of context:

"An expression such as 'special circumstances' is by its nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend on the context in which they occur. For it is context which allows one to say that the circumstances of one case are markedly different from the usual run of cases. That is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be regarded as special".

27.        The decision of the Tribunal in Beadle was affirmed by the Full Court of the Federal Court on appeal: [1984] AATA 176; (1985) 7 ALD 670. While the Court recognised that it was not possible to lay down precise rules as to what constituted special circumstances, the expression "unusual, uncommon or exceptional" was not, as Hill J noted in Dranichnikov v Centrelink(2003) 75 ALD 134; [2003] FCAFC 133 at [65], actually affirmed by the Full Court.

28.        In Secretary, Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 116 FCR 1 at [17] Heerey J said, in the context of the statutory predecessor to s. 1184K of the align="left">"It is not sensible to lay down precise limits or precise rules about what may constitute special circumstances: Beadle v Director-General of Social Security [1984] AATA 176; 7 ALD 670 at 673; [1984] AATA 176; 60 ALR 225 at 228. Ill health financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances Kirkbright v Secretary, Department of Family and Community Services [2000] FCA 1876; (2000) 106 FCR 281 at 284, 288; see also Kertland v Secretary, Department of Family and Community Services [1999] FCA 1596; (1999) 95 FCR 64 at 71."

29.        Similarly, in Groth v Secretary, Department of Social Security[1995] FCA 1708; (1995) 40 ALD 541 at 545 Kiefel J said, in a passage she again adopted in Secretary, Department of Family and Community Services v Chamberlain[2002] FCA 67; (2002) 116 FCR 348 at [19]:

"The phrase “special circumstances”, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (at ALR 229; ALD 674), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied."

30.        Further, as Kiefel J noted in Chamberlain at [34]-[35] and Lindgren J noted in Clark v Secretary, Department of Employment and Workplace Relations[2007] FCA 1076; (2007) 96 ALD 129 at [75]:

"The expression “special circumstances” in s 1184K does not embrace the circumstance that the 50% rule will yield a preclusion period beginning on a certain date that will or may be excessive, even grossly excessive, having regard to the component included in a lump sum settlement for loss of earnings or of earning capacity, to the age of the injured person, and perhaps to other circumstances."

31.        In Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152; [2004] AATA 615 at [27] Downes J expressed the view that both hardship and unfairness can form the basis of exercising the discretion under s. 1184K of the Act.

Evidence

32.        The Tribunal was provided with a number of documents including the section 37 documents and written submissions from the parties.

33.        The Tribunal considered the oral submissions of Mr Owen and Mr. Maishman.

CONTENTIONS

Applicant’s Contentions

34. The applicant contended that Centrelink wrongly interpreted the provisions of the Social Security Act 1991 (“the Act”) by imposing a compensation preclusion period and by the recovery of monies from her.

35. Specifically, the applicant contended that the settlement of her District Court claim for compensation for a lump sum amount of $100,000.00 in addition to payments made in accordance with the Workers’ Compensation and Injury Management Act 1981 plus costs of $21,000.00, inclusive of disbursements, was wrongly interpreted by Centrelink to impose a compensation preclusion period and a recovery of $20,092.79 from her.

36.        The applicant contended that there was no component for economic loss in the settlement of her District Court claim.

37.        The applicant contended that the settlement document from the District Court in the T documents at pages 118 and 119 set out the resolution of the Court proceedings and does not include any component for economic loss.

38. The applicant contended that in defining compensation in section 17(2) as being a payment that is made wholly or partly in respect of lost earnings or lost capacity to earn (resulting from personal injury) is relevant and in order to apply section 17(3) of the Act the decision maker must firstly establish that compensation has been paid.

39.        The applicant relied upon the prior decision of the Tribunal in Fuller v Secretary, Department of Family and Community Services [2004] AATA 615 at page 5 and asserted that the applicable process for the resolution of the issues was not included.

40.        The applicant further contended that the settlement component relating to costs should not be included in the calculation of any preclusion period.

41.        The applicant contended that there were special circumstances that warranted a waiving of the preclusion period and a full refund.

Respondent’s Contentions

42.        The respondent contended that as a consequence of the resolution of her District Court action the applicant, who was in receipt of an aged pension from 9 April 2008 received a compensation affected payment and that the lump sum settlement affects her entitlement to payment.

43. Section 1169 of the Act states that a person cannot receive a compensation affected payment during a lump sum preclusion period and that the start date and length of the lump sum and preclusion period are determined according to section 1170 of the Act.

44. The respondent contended that the start date of the preclusion period in relation to the applicant’s claim was 3 February 2008, the day after the applicant’s weekly compensation payments ceased. The respondent contended that it was appropriate pursuant to the Act to calculate 50% of the total of the applicant’s lump sum payment in consideration of the preclusion period.

45.        The respondent contended that calculation of the effect upon the applicant’s entitlement to payments was correctly made as follows:

·50% of the applicant’s lump sum payment =  $60,000.00.

·The income cut out amount calculated with reference to the fortnightly maximum basic rate at the time of the settlement = $742.90.

·$60,000.00 divided by $742.90 results in a preclusion period of 80 weeks.

·The preclusion period commences on 3 February 2008 and ceases 80 weeks thereafter, on 15 August 2009.

46.        The respondent contended that the duration of the preclusion period was calculated correctly and applied to the applicant’s age pension entitlement.

47.        Whilst the applicant had maintained that a preclusion period should not apply to her age payments because she claimed there was no component for economic loss in the memorandum of consent judgment and therefore the 50% rule should not apply, the respondent argued that the Particulars of Damage filed at the District Court on behalf of the applicant on 17 December 2009 included a claim for past and future loss of earnings and loss of superannuation.

48.        The respondent claimed that it was reasonable to deduce that the settlement lump sum included a component of economic loss because that was the basis upon which the applicant stated her claim for settlement in the District Court proceedings.

49. The respondent contended that the appropriate recovery notices were sent to the applicant and to the Insurance Commission of Western Australia notifying them of the requirement to repay Centrelink the charge amount of $20,092.79 and that pursuant to section 1184 of the Act, the charge was a debt due to the Commonwealth.

50.        The respondent contended that the special circumstances claimed by the applicant do not apply to the applicant’s lump sum settlement.

51.        There was no submission on behalf of the applicant in relation to straitened financial circumstances.

CONSIDERATION AND FINDINGS

52.        The Tribunal accepted that the applicant was injured at work on 2 February 2007 and that she received compensation payments until 2 February 2008.  The Tribunal further accepted that the applicant was in receipt of aged pension from 9 April 2008 and that on 13 January 2009 she settled her District Court compensation claim for a lump sum settlement of $100,000.00 plus costs of $20,000.00 inclusive of disbursements.

53. The Tribunal finds that the settlement of her claim is compensation by application of sub-section 17(3) of the Act with the consequence that an amount is a compensation part of a lump sum. The Tribunal finds that a preclusion period must be applied to the applicant’s age pension in accordance with section 1169 of the Act.

54.        In considering the period for which the applicant is precluded from receiving age pension, the Tribunal considered whether it was appropriate to have regard to 50% of $120,000.00 or 50% of $100,000.00.  Whilst the applicant relied upon Fuller v Secretary, Department of Family and Community Services [2004] AATA 615 at page 5 as authority for the non-inclusion of legal costs in the calculation of the compensation payment, the respondent relied upon a later decision of PG v K and the Secretary, Department of Family Housing Community Services and Indigenous Affairs (2008) AATA 301 which rejected the contention that Fuller stands for the proposition that legal costs should be automatically treated as not having been made. 

55.        Mr. Maishman advised that when costs are known, it is Centrelink’s policy not to include those costs when calculating the preclusion period.  In the present case the evidence was that the amount of $20,000.00 inclusive of disbursements may not have been the entire amount of the costs charged by the applicant’s solicitors, however it was not disputed that an amount of $20,000.00 represented party-party costs and was at least a proportion of the costs that the applicant had been charged.

56.        The Tribunal finds that there is sufficient evidence that an amount of at least $20,000.00 was charged to the applicant by way of costs and that therefore that is an amount that should be excluded when calculating the preclusion period.

57. The Tribunal finds that there is insufficient evidence to show that the compensation claim for a lump sum amount did not include any amount for wages beyond the age of 65. Whilst the applicant was not entitled to weekly payments of compensation pursuant to the Workers’ Compensation and Injury Management Act 1981 by virtue of her age, such restrictions do not apply to claims for damages issued in the District Court and indeed the Particulars of Damages which were filed on her behalf by her solicitors specify a claim for compensation for her economic loss arising out of her inability to continue to work to an age past the age of 65.

58.        The Tribunal further notes that the letter from the applicant’s representative to Centrelink at page 129 (T15):

“It is certainly news to us that Part 3.14 allows Centrelink to recover age pensions, particularly when the workers’ compensation system in WA does not allow workers’ compensation payments to be paid beyond the age of 65 (other than for a one year payment under certain circumstances)”.

59.        Whilst it was argued on behalf of the applicant that special circumstances should apply to the applicant because she was unaware that settlement of her claim would affect her entitlement to the age pension, the possibility that the applicant did not know about the preclusion period is a matter between her and her solicitors.

60.          No evidence in relation to the applicant’s current economic position was put forward.

61. The Tribunal finds that there is insufficient evidence of any special circumstances, as provided in section 1184K of the Act to warrant a waiving of the preclusion period and a full refund.

DECISION

62.  The Tribunal decided to vary the Decision under review and to refer the matter back to the respondent to calculate the preclusion period applicable to the applicant’s age pension by reference to a relevant compensation payment of $100,000.00.

I certify that the preceding 62 paragraphs are a true copy of the reasons for the decision herein of Ms K Hogan, Member .

..(sgd) T Freeman......

Associate

Dated 2 March 2012

Date of hearing	24 October 2011
Applicant	In person
Advocate for the Respondent	Ms M Conlon